Brought to book: Students started protesting against tertiary education fees in 2015 with the Fees Must Fall movement. Nsfas funding still fails to cover the so-called missing middle students. Photo: Michele Spatari/AFP
US president Joe Biden last week announced his student debt relief plan, which will either significantly minimise or totally eliminate a burden encumbering 43-million people. The president noted that, as a result of this action, the whole economy would be better off.
“All of this means people can start to finally crawl out from under that mountain of debt to get on top of their rent and their utilities, to finally think about buying a home or starting a family or starting a business,” Biden said.
Closer to home, some have raised the alarm over South Africa’s student debt — which, since 2011, has snowballed from R3.2-billion to more than R16-billion.
The department of higher education has expressed concern about the mounting debt, which threatens the sustainability of South Africa’s public universities, but says it does not have the money to go about clearing it. If this debt is allowed to go unchecked, and universities are allowed to crumble under its weight, it could hamstring the country’s already struggling economy.
Data from Universities South Africa (Usaf) shows that student debt has gone from 23% of universities’ fee income in 2011 to 52.3% of fee income in 2020. On average, student debt grew by 20.3% year on year.
Earlier this year, universities went to parliament to discuss a spate of student protests and a number of other issues besieging the country’s higher education institutions, which have seen enrolments more than double in the past two decades.
At that meeting, Usaf head of operations Linda Meyer noted that student debt is part of a number of “perennial challenges” that have come to undermine the financial sustainability of universities.
“It is really about universities being financially exposed and remaining going concerns. We cannot have a situation where we have universities facing the same fate as SAA etc. We need to find very tangible solutions to address our student debt issue,” Meyer said.
She noted that servicing this debt costs universities about R1.2-billion each year and that 120 000 students are unable to graduate because they owe R7-billion to these institutions.
“And this is antithetical to the entire higher education ethos and system of producing the necessary skills for us to have economic growth.”
Last year, Higher Education Minister Blade Nzimande announced that he had appointed a task team to look into student funding policy which, over the years, has proved to be financially and fiscally untenable. Earlier in 2021, the minister said the department was not in a financial position to clear student debt.
Speaking to the Mail & Guardian this week, Usaf chief executive Ahmed Bawa said the debt was “real money for universities”.
“It is built into their budgets. It is built into their balance sheets. Had that money been available to the universities, they would have used it for infrastructure, maintenance, employing more academics. So, it is real money,” he said. “If you look at the scale of that money … then it suddenly dawns on you that, if the state provides the universities with about R50-billion a year in subsidies, then this is a third of that.”
Bawa said South Africa needs a national solution to the student funding crisis. “I don’t think there is any way out of having a national programme to support the higher education aspirations of young people from, in particular, poor and working-class families … The long-term consequences are very dire, not just in terms of student debt, but also in terms of providing young people and their families with the opportunity of getting on with higher wages.”
The country’s student funding crisis was thrown into sharp relief when the FeesMustFall movement swept through the country’s higher education institutions in 2015.
The movement forced the president at the time, Jacob Zuma, to appoint a commission of inquiry into the feasibility of fee-free higher education. The commission, which was chaired by retired judge Jonathan Heher, released its report almost five years ago.
Analysts have pointed to the commission’s recommendation the government create an income-contingent loan scheme as a possible solution to the student funding dilemma.
Philippe Burger, head of the economics department at the University of the Free State, explained that at the heart of the country’s student funding problem is the “missing middle” — students who are too poor to afford university fees out of their own pockets but not poor enough to qualify for the National Student Financial Aid Scheme (Nsfas).
The household income threshold for Nsfas funding is R350 000. But, Burger noted, that threshold had not been adjusted according to inflation since it was introduced in 2018, meaning households that, in real terms, would qualify for this funding no longer do.
The government’s fiscal consolidation efforts make it difficult to fully fund the missing middle.
An income-contingent system would allow a student to take out a loan at the start of their studies, with all payments being deferred until they could repay their debt without it being a burden.
The Heher Commission recommended that, to make this type of loan possible, the government and the private sector should fund it.
Following through with this recommendation has probably proved politically thorny, considering students have called for higher education to be made free, Burger said.
Moreover, ironing out the details of the scheme — such as the interest that will be charged on the loans and the minimum income graduates will have to earn before they start paying back their loans — is a complex task.
The private sector’s involvement in the scheme is ultimately in its best interests.
“In the long run you need an economy that grows,” Burger said. “And for that economy to grow, you need a skilled workforce.
“It is in everybody’s interests that we upskill our workforce. South Africa is a country that has a huge shortage of particular skills. So, it would behove us to invest and get those skills up and running.”
William Gumede, an associate professor at Wits University’s School of Governance, agreed. “From an economic point of view, for their own self-interest, they have to get involved.”
He said it is incumbent on South Africa’s businesses to invest in higher education, as part of their corporate social responsibility. “In order to safeguard the future of the country, we really need investment in education.”
High levels of student debt posed a risk to the economy, Gumede noted. “Any massive debt has a risk associated with it … The crisis will worsen if the economy continues to fail — we have these high levels of debt and then people can’t get jobs. So, it is a crisis already, because many students can’t get jobs and the economy is not growing. It is a real crisis.”
Prior to 2020, when South Africa’s economy was dealt a brutal gut punch, the country had endured more than a decade of anaemic growth, which had slowed markedly after the 2008 global financial crisis. In the decade before 2008, GDP growth was 4% a year. Between 2010 and 2019, economic growth slowed to just 1.7% a year.
Slow economic growth has been accompanied by a deepening unemployment crisis. The official unemployment rate among 25-to-34-year-olds is 41.2%.
Burger noted that the graduate unemployment rate, which during the second quarter of this year was 10.2%, is far lower than the unemployment rate among people with just a matric certificate (35.%).
“If you have institutions falling into dire straits, financially, it affects their ability to provide education to large numbers of people. Even if these institutions muddle through, the quality of what they offer will go down …
“And in some cases, when an institution runs into serious trouble, they may have to cut back. That not only affects quality but also the number of students they are able to serve. That is the danger,” he said.
“It then becomes akin to what we see in service delivery, where people owe so much money to municipalities that they cannot earn enough money to continue providing services. At institutions where the debt level is quite high, they run that sort of risk.”
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