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SA government unveils student funding proposal

South Africa's government has made public a student funding plan that makes provision for the ‘missing middle’ group of students who do not qualify for support under current schemes.

The proposed Ikusasa Student Financial Aid Programme, published in the Government Gazette on 21 April for comment, sets out support structures for students whose families earn up to R600,000 (US$46,000) per year.

It aims to replace the National Student Financial Aid Scheme that supports students with a household income up to R122,000 per year. The ISFAP scheme is designed to help students meet tuition fees as well as living expenses.

The NSFAS currently offers a 100 per cent loan to qualifying students. If a student passes all three years, 60 per cent of the loan is converted to a grant that does not need to be repaid.

However, the NSFAS has been criticised for high dropout rates and costs, as well as for its failure to support the missing middle.

Higher education minister Blade Nzimande set up a team in April 2016 to produce a plan for students who do not qualify for government grants but can’t afford university fees on their own. The team’s findings informed the ministry’s new proposal.

ISFAP would keep supporting students from the poorest backgrounds, but it adds funding to help the missing middle students from households earning between R122,000 and R600,000 per year.

ISFAP splits the missing middle into two groups: the upper missing middle and the lower missing middle. It does not specify where it draws the line between the two groups.

Students in both groups would have to pay certain amounts towards their university costs, but would also qualify for grants and loans.

Students in the upper group would pay a larger family contribution than the lower group. They would qualify for grants and loans in the first year of study, and loans only for subsequent years. Their loan-to-grant ratio would be figured out by an equation depending on the financial means of the household.

The lower group would pay less than the upper group as a family contribution towards their university costs. They would receive a grant in the first year, a combination of loan and grant in the second, and loans only for later years.

Students defined as working class or poor, previously covered by the NSFAS, would still pay a contribution towards their education, but less than the lower missing middle group. They would receive full grants for two years, a mixed grant and loan in the third year, and a loan in the fourth year of study.

The “very poor”—who are not well defined in the proposal—would receive full grants for three years of study, and a loan-grant mix in the fourth. They would not have to pay any contribution themselves.

ISFAP differs from the NSFAS in that it would decide who gets and does not get funding, and what the grant-to-loan percentages would be for each student. By contrast, the current NSFAS scheme places this task on institutions.

ISFAP would also treat grants and loans separately from the outset, which distinguishes it from the NSFAS transition formula.

The plan says 65 per cent of South Africa’s student body would fall under the new scheme. It would cost South Africa a total of R42 billion per year. But while the NSFAS was funded wholly by the government, ISFAP would be a hybrid model between government and investors.

Negotiations for funding are underway with the Treasury, itself the site of recent upheaval in the form of the sacking of former finance minister Pravin Gordhan and his replacement by Malusi Gigaba. “[The task team] is in discussion with National Treasury about the requirements to entice private investors, which may require such mechanisms as government guarantees and sharing of risk capital,” the report states.

Another revenue idea is to use the government’s Black Economic Empowerment Act to entice companies to invest in bursaries. Companies fund skills development programmes under the act, and the task team says Nzimande must ask for a quarter of this skills funding for ISFAP.

Under the higher education ministry proposal, ISFAP would be a split between a management company and a funding company. The funding company would direct investment from the private sector, such as bonds, to the managing company that would fund students.

“In order to gain private funding, the new entity will need to be rated, have ‘fit-for-purpose’ systems and reputable operations, evidence of recoverable loans, and an aspirational brand,” the proposal states. This is to counter the “many negative public views” of the NSFAS, it adds.

Government contributions would go straight to the management company.

Student groups are unlikely to be impressed by the plan given their consistent calls for free education, and rejection of loan-based solutions.