Student aid scheme creaks into action

November 10, 1995

A financial aid scheme for South Africa's 70,000 needy students at universities and technikons has finally been given the go ahead. But with less than four months to go before the start of the 1996 academic year, the government is under pressure to implement the scheme as soon as possible.

A bursary and loan scheme for the swelling population of poor black students is way overdue. The government plans to introduce an interim scheme, costing an estimated R650 million (Pounds 114 million), next year. A "final" scheme which includes college students, will be in place for 1997.

The country has opted for a limited scheme which combines bursaries and loans, requires means testing and, for the next year at least, uses the Tertiary Education Fund of South Africa (Tefsa) to administer the system, and recovers income contingent loans through employers.

Cabinet accepted proposals for the interim National Student Financial Aid Scheme, drawn up by the National Commission on Higher Education last month.

Sibusiso Bengu, the minister of education, has since established a committee of higher education leaders to consider ways of financing the scheme in the long term and mobilising donor support. He is also setting up a financial advisory committee.

Although there is general agreement that a financial aid scheme is essential and that students should share the costs of their higher education, deciding on a scheme has been a protracted and sometimes painful process.

A technical committee of the commission held an intensive four-month investigation, and there were two consultative conferences with a wide range of tertiary stakeholders before a first report was submitted to Mr Bengu. This report has not been publicised, but a copy obtained by The Thes revealed what the new scheme will look like.

South Africa has remained committed to student fees in the face of increasing numbers of poor students. As a result, the report says, there have been: "Major reallocations of institutional resources away from teaching and research to bursaries and loans, massive international and national fund raising for student financial aid, growing institutional bad debt from unpaid student fee accounts, large numbers of students carrying excessive loan burdens, students denied permission to re-register or graduate as a result of unpaid fees, and an on-going series of student campaigns aimed at rectifying a clearly unacceptable situation."

The new scheme will apply to all higher education students and will be financed by new government appropriations, donor support and some form of loan capital. The scheme will be limited since, the report says, it must be affordable and "cannot be simply demand driven". If the target amount of money is not raised, the reduced funds will be distributed among the same number of students.

NCHE's finance task group estimated that next year 70,000 students would need R895 million, of which families would contribute R145 million and institutions R100 million, leaving a scheme which would cost R650 million.

Once the scheme is up and running, it is calculated that the government will have to inject R250 million a year to keep it going. Student default on loan repayments is calculated at around 38 per cent.

Universities and technikons are unhappy about the contribution expected from them, and an estimated further R100 million in bursaries which they are expected to give directly to students. They doubt whether donors will continue to provide large sums for bursaries once the scheme is operating.

The scheme will assist but not meet the full private costs of needy students. Aid packages will be individually tailored, will have loan and bursary components and, says the report, "ideally, work study and community service" elements.

The bursary component will be at least 40 per cent, although that could rise on successful completion of each year of study, and families will be expected to contribute up to 16 per cent, depending on income.

Eligibility for student aid will be decided on academic potential, gross family income (probably of less than R50,000), what is to be studied and the level of financial demands on the scheme.

The scheme will allocate funds directly to institutions based on "forward bids" and negotiations between the institution and a proposed financial aid council. Institutions will pass money on to students as credits on their fee accounts.

The report stressed that the scheme should be financed from new government money and donor organisations, not from deductions from current institutions' subsidies. "If sufficient funds cannot be derived from these two sources, use should be made of capital loan funds from the private sector."

NCHE's finance task group originally proposed that the scheme be based on government guaranteed loans from the banking sector, and that mortgage, rather than income contingent, loans be offered.

But banks refused to participate if loans were not guaranteed, since current student default rates of 50 per cent and higher are an unacceptable risk. They preferred mortgage loans which would be rapidly repaid in the years after graduation.

Higher education stakeholders argued that there would be little incentive for banks to criminalise defaulting future clients, or for struggling graduates to repay their loans, if both knew the government would cough up. Students refused to consider mortgage loans with a suggested loan interest of 16 per cent, which would place an enormous burden on them.

The chosen alternative was to secure government and donor funding administered and allocated by Tefsa, which has been the conduit for state and donor aid for the last five years. Tefsa recovers student loans through employers.

There is now furious activity to secure government funding, to appeal to local and international donors, to explore possible contributions from the tax system and to find low interest and flexible sources of loan capital, possibly involving tax incentives for investors.

Students want the scheme in place by February 1996, and have the will and the muscle to cause campus chaos once again if it is not.

Please login or register to read this article

Register to continue

Get a month's unlimited access to THE content online. Just register and complete your career summary.

Registration is free and only takes a moment. Once registered you can read a total of 3 articles each month, plus:

  • Sign up for the editor's highlights
  • Receive World University Rankings news first
  • Get job alerts, shortlist jobs and save job searches
  • Participate in reader discussions and post comments

Have your say

Log in or register to post comments