For several years now, ignorant armies have been clashing by night, and day, over the financing of university students through their courses. It is time to take stock of the constraints within which solutions must be sought.
- The government does not have remotely enough money to fund tuition fees, accommodation, meals, books and travel for all students, even if there is an offset contribution related to household income. At the present level of funding of the National Students Financial Aid Scheme, tuition fees can be fully funded for all students from households with incomes less than the personal income tax threshold (currently R 73 650 per annum). In addition, partial funding of tuition fees on a linearly declining scale is possible up to a household income of R 150 000 per annum. But no more.
No amount of lecture disruption or campus blockading, or poo or Molotov cocktail throwing, or taking vice-chancellors, senates or councils hostage is going to change this fact. Although it may be that an allocation to NSFAS over and above that planned will be made next year, it is unlikely to be large enough to change much, given current fiscal austerity.
- When making decisions about applications and enrolments, students, and the households from which they come, have far too little information. The inevitable result is sub-optimal choice. To improve the situation every university should publish the following information by June each year:
- Costs. (a) Tuition fees for the following year, (b) Information about accommodation costs, not only in university residences, but in private rental accommodation within reach of the university, if needed, (c) an estimate of the minimum costs of purchased meals, if needed, (d) a provision for books and other study materials and (e) a provision for travel costs
- Available financing options. (a) A description of National Student Financial Aid Scheme (NSFAS) rules, (b) A description of the contribution towards costs which the university can make from its own resources and (c) material from the banks about loan eligibility. The financing must be available to all students who qualify, departing from the practice of funding some, but not others
- A ready reckoner of total cost and the extent of available financing. The purpose of all this information is to estimate the required household support which a student will need to undertake a course of study.
This establishes an upfront price to a household for a course. Like all prices, it can and should play a role in determining decisions, in this case about applications. Households may consider a range of courses and a range of universities. Some households may not be able to mobilise resources for any course of studies. Others may find that they cannot finance the university and course preferred by a potential student, but can finance another for which the student is qualified. There is no getting away from these choices. Not to make them, not to have the information to make them, is bound to lead to an impossible financial situation for students down the line.
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It has to be recognised that the goal of 1.6 million registered students by 2030 implies austerity for the universities, even if government subsidies to them rise somewhat as a percentage of Gross Domestic Product. Trying to escape austerity by raising fees faster than average household income implies, other things equal, that the price to households will rise faster than the ability to pay it. The practical guideline should be that fees should not rise faster than nominal Gross Domestic Product per capita. Using October 2015 World Economic Outlook Data, this means that fees in 2016 should not exceed fees in 2015 by more than 5.6%.
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The Minister and the Department of Higher Education and Training need to focus on optimising policy within the envelope of available resources. It is not that they don’t know what the envelope is. The Medium Term Expenditure Framework sets it all out for three years in advance. But the task of fitting policy into the envelope is being shirked. The 2014 White Paper for Post-School Training and Education is a case in point. It said that when funding becomes available, we shall do this, and when funding becomes available, we shall do that. And when funding is not available, we shall encourage students to demonstrate outside the Stock Exchange, since they have money there. Non-decision making of this sort fails to provide leadership and encourages irresponsibility elsewhere in the system.
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Higher education qualifications, particularly degrees, confer substantial private benefits in the form of higher income. It is therefore appropriate that students bear some of the cost of higher education. The purpose of a loan scheme, such as NSFAS, is to finance students before they earn, and recover costs once they are in a position to pay them. Not all the costs of university education should be privately borne, since some benefits of university are social, and not privately captured. In the United States, the standard principle is that half of teaching costs should be socially funded, and half privately funded. Our university funding formula entails a considerably lower private component. Even in countries where the private contribution has been low in the past, the advent of mass higher education has forced it upwards.
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The original intention behind NSFAS was to provide a pure loan scheme. Repayments from one generation of students would be recycled into loans for the next. Since the system was expanding and since defaults and repayment rules would not permit full recovery, additional injections from the state have been provided every year. Soon after NSFAS’s inception, however, rebates of various kinds were introduced, to the point where return flows have become small in relation to advances. One response to this development would be to make NSFAS a 100% grant scheme. Another would be to return NSFAS to its original mission. The second course of action would make more NSFAS funding available each year.
- The structure of higher education is likely to change considerably in the coming decades and student financing will have to change with it. Many open and proprietary online courses are already available and more will appear. Studies show that purely online learning is not suitable for everyone, but ‘blended’ modes of instruction – partly online and partly contact – are possible, and online material can be used in traditional contact instruction. The length and composition of courses of study are likely to be become more variable, and the interaction between work and learning more complex and interwoven over an entire working life. All these developments have the potential for reducing costs and may well imply a diminishing need for student financing.
Charles Simkins
Senior Researcher
charles@hsf.org.za
