17 March 2010 1

Department of Higher Education and Training

PRESENTATION OF REVIEW COMMITTEE REPORT:

NATIONAL STUDENT FINANCIAL AID SCHEME

STRUCTURE OF PRESENTATION Why was there a review of NSFAS? Key findings of the review What are the key recommendations? What are the challenges? How are we dealing with this?

March 2010 2

Why a review of NSFAS? Administrative capacity had not kept pace with

growth in size of fund (a 10-fold increase in NSFAS budget between 1999 and 2010)

Concerns regarding growing number of blacklisted borrowers

Need to assess short, medium and long term growth requirements of fund to increase access, particularly of poor students

Need to review distribution/ allocation policies and mechanisms

March 2010 3

Process ahead Executive Summary was presented to

Cabinet on 24 February 2010 Release report for public comment 16 March

2010 Urgent work on key areas simultaneously

undertaken Call for comment and public participation

process Responses and bring recommendations to

Cabinet by end of August

March 2010 4

Current Situation: Key facts 17% of HE Students receive NSFAS funds–

unevenly distributed across HEI Allocations to HEI on the basis of ratio of

disadvantaged students The upper limit of family income in order to

qualify for NSFAS is R122 000 pa Not all universities allocate funds sufficient to

cover the full cost of study Student debt at HEIs is in excess of R2b, in

addition to the loan book of NSFAS

March 2010 5

There are 256 258 borrowers on NSFAS books of which 153 596 are still studying

In 2009, 217 470 (33%) NSFAS students were still registered students; 125 210 (125 510) had graduated; 316 320 (48%) had dropped out without completing their studies ,

Loan recovery rate 20 – 26%

March 2010 6

Key findings: Allocations

The amount of NSFAS funding available falls far short of demand

There are significant gaps between the NSFAS award and the full cost of study for many students – underfunding contributes to drop-outs

There are many families who cannot afford HE but whose income is above the threshold of R122 000 – the ‘missing middle’

March 2010 7

Key findings: Allocations

The disadvantaged student index used to allocate funds to institutions focuses on race to the exclusion of class - although individual awards are based on class.

March 2010 8

ALLOCATION FORMULA (1)A Sample of HEIs

HEI Average NSFAS Award

FCS Ratio

UCT 21 369,59 54 610 2,6

UFH 10 858,60 32 340 3,0

UP 22 657,28 47 645 2,1

UL (P’KWANE) 16 935,42 41 069 2,4

WSU (B’WORTH)

6 615,92 25 983 3,9

March 2010 9

Key Findings: Loan practices NSFAS Act gives extra-judicial garnishee power

(8 344 borrowers affected) Predecessor (prior to NSFAS) loans have mostly

prescribed and are legally unenforceable, but remain on loan book

The loan book is currently 350% of the value of the combined original loan

The loan book is being reviewed in terms of the national credit Act, and its value will be significantly reduced

March 2010 10

KEY FINDINGS: EXPANDING ACCESS

March 2010 11

FREE UNDERGRADUATE EDUCATION FOR THE POOR: PROJECTIONS VARYING PARTICIPATION (CURRENT VALUES)

Participation Rate (% age

group)

% of poor or working class

students

Estimated cost in 2010 (R,bn)

Estimated cost in 2020 (R,bn)

17 14 5,2 5,6

25 9,2 10,0

40 14,8 16,0

20 14 5,3 6,6

25 9,5 11,7

40 15,2 18,7

24 14 5,5 7,9

25 9,8 14,2

40 15,7 22,7

March 2010 12

FULL STATE SUBSIDY FOR FET COLLEGES (NCV)

Enrolment Rate (%age group)

2,4% 10% 20% 40%

Students (NCV) 124 530 141 660 150 874 160 687

Cost R4,234b R4,816

Assumptions

All students receive full subsidy/free education.

Average full cost of study: R34 000 per annum.

Costing in 2009 prices.

Enrolment Rate (% age group)

2,4% 10% 20% 40%

Students (NCV) 130 662 539 332 1 078 665 2 157 330

Cost R4,443b R18,337

2010 SCENARIO

2020 SCENARIO

March 2010 13

Key findings: Administration and Governance There is a need for strong governance A capacity and skills audit is required to

determine the capacity of the current organisation and how it can be strengthened

Loan administration at institutional level is weak

March 2010 14

Strengthening of financial aid offices Development of loan administration and

bursary administration competencies FET bursary award system to be reviewed

to eliminate inefficiencies

March 2010 SECRET 15

KEY RECOMMENDATIONS

March 2010 16

Key Recommendation: Expanding Access A comprehensive policy framework should be

developed to articulate the details of the national policy imperative of providing free higher and further education progressively with a focus on the poor

March 2010 17

KEY RECOMMENDATIONS: ALLOCATIONS Institutional allocation formula: from

race based to class based All institutions should receive the

average full cost of study per student, regardless of the institutionally determined cost of study

Changes to the student allocation of loans: all students qualifying for NSFAS to get the full cost of study

March 2010 18

KEY RECOMMENDATIONS: LOAN BOOK Compliance with the National Credit Act

March 2010 19

IMMEDIATE ACTION (1) Loan Book

Requested for an audit of the R 10 billion loan book within this financial year

Legal opinion being solicited in relation to NSFAS compliance with the Constitution and the National Credit Act

Loan recovery mechanisms to be immediately compliant with the legislation and model of interest calculation and payment triggers to be identified

Technical task team to review the cost implications of incremental roll-out of fully subsidised undergraduate education for the financially needy

Working group to assess the feasibility of increasing FET 80% bursary to 100% in line with DHET's goal of increasing access in college sector

March 2010 20

IMMEDIATE ACTION (2)

Administration and Governance HR expert from DHET advising on internal

restructuring and policies of NSFAS Close monitoring of progress of Governance

review commissioned by NSFAS Minister to consider appointment of a turn-around

team to improve administration in line with recommendations (CEO has now been appointed)

March 2010 21

WORK UNDERWAY DURING PUBLIC COMMENT PERIOD Simplify means test and uniformly apply at all

institutions Review of funding of higher education and the link to

the rising cost of study at institutions Commission research into inter-relationship of

affordability, access and success Task team to review possibility of loan recovery by

SARS Solution for the 'missing middle' - children of public

servants earning between R 122 000 and R 300 000 and are members of the GEPF – task team to work with the PIC in pursuing this option  

March 2010 22

Thank You

March 2010 23