The student funding gap and the ‘missing middle’

Anele Mtwesi looks at the current higher education funding crisis and government's inability to address the 'missing middle'.
The class of 2015 were lauded by the President and the country, as a whole, for demonstrating courage and resilience. This was after students from all universities embarked on week-long demonstrations under the banner #FeesMustFall. 
The demonstrations cast a spotlight on higher education funding and access. Although the focus of the demonstrations was on the fee increments for 2016, a number of other factors formed the backdrop: from inadequate funding for poor students, the rising cost of higher education, the real decline in government subsidies, to the lack of transformation in the higher education sector.   
With the academic year just beginning, many students and universities are confronted with the real question of where the money will come from to fund the cost of studying. In a joint statement vice-chancellors, principals and rectors from all universities made a “call for adequate financial aid to allow all academically qualified students to enrol in university... without prohibition”.[1] This call comes after the national government mobilised R 6.8 billion – R 4.5 billion for the National Students Financial Aid Scheme (NSFAS) and R 2.3 billion directly to universities to offset the effects of the fees freeze. This still isn’t enough to fill the gap caused by a mismatch between increased access and government funding. 

The funding gap

Government funding for higher education has fluctuated significantly in real terms from 0.68% in 2004, 0.63% in 2007, 0.72% in 2010 and 0.80% in 2015*.[2] This underfunding has been recognised by government and other stakeholders and was highlighted in the 2013 Ministerial Committee for the Review of the Funding of Universities chaired by Deputy President Cyril Ramaphosa. The Report acknowledged that “government funding has not kept pace with the growth of enrolments in the system”.[3]
The Ministerial Committee recommended that government spending of 0.75% of Gross Domestic Product be increased, to match the envisaged enrolment levels of 1.6 million students by 2030 from 950 000 in 2010 and to be more in line with international levels of expenditure.[4]   Increased spending to match this target seems pretty obvious from a planning perspective, but government has not done much to address the shortfall caused by increased enrolment or attended to any of the other recommendations made by the Ministerial Committee. 
This essentially means students have been increasingly bearing the rising cost of higher education. An increase in government spending would ease the burden while ensuring the quality and standard of education is both increased in Historically Disadvantaged Institutions (HDIs) and not dropped in previously white institutions.   
The Ministerial Committee found that, in real terms, state funding of higher education had been on the decline between 2000 and 2010. Funding per full time equivalent (FTE) enrolled student had dropped by 1.1% annually, in real terms, and during the same period tuition fees per FTE student had increased by 2.5% annually.[5]  
One would have expected an immediate response from the Minister of Higher Education and Training, Blade Nzimande, and Government as a whole. Yet three years after the release of the Report Government has no tangible solution to the higher education funding crisis. The Report made two recommendations on the level of funding for higher education:
  1. Government should increase the funding for higher education, to be more in line with international levels of expenditure.[6]  
  2. The Department of Higher Education and Training should monitor the actual cost of proving higher education, to inform its bids to government for funding allocations for the higher education sector.  [7]
These recommendations together with those made by the 2009 Ministerial Committee for the Review of the National Students Financial Aid Scheme allude to a deeper problem within the funding of higher education in South Africa.  The NSFAS Review Committee recommended radically revising the current higher education funding model to substantially increase the funding for higher education generally, and specifically for higher education student financial aid. The revised model would progressively increase access for students from poor and working class families. The revised model would also provide student loans on favourable terms to students from lower middle-income families: the ‘missing-middle’.[8]  

The missing middle

The ‘missing middle’ are students whose families earn above the R122 000 per annum qualification threshold used in the NSFAS means test. This exclusion has caused great unrest and has been condemned by institutions, financial aid offices and students.[9] 
While the use of a means test is necessary, the current structure of the means test and the way it is applied by higher education institutions is inappropriate, inconsistent and undermines the strength of the scheme.[10] The biggest weakness is the calculation formula for expected family contributions. This calculation excludes students from families who earn above a R122 000 per annum limit.  This exclusion does not take into account the ability of the family to raise money to finance higher education. 
The use of the means test has resulted in many students providing false information in order to qualify for financial aid. Students in the ‘missing middle’ cohort represent a large portion of students at both public and private institutions across the country. These are children of civil servants and lower middle-class families, who, while being disqualified from NSFAS, cannot raise the funds from commercial banks because the risk of default is too high. 
An assessment of the gap between the demand for and supply of credit available to students in the South African market is necessary to ensure there is both a sufficient supply and ability to access it by those in the ‘missing middle’ and those that do not get full funding from NSFAS. 
Government has ignored both Ministerial Review Committees recommendations on restructuring the funding model, increasing funding to universities and the call for a clear policy on higher education. 

Government’s solution – increase NSFAS funding

NSFAS will be funding 205 000[11] of the over 1 million[12]  enrolled first-time and continuing eligible students across all 26 universities. This still leaves a huge gap for those eligible to study but unable to raise the funds.
The most recent response to this crisis has been the increase in NSFAS funding from R 9.5 billion in 2015 to R 10 billion in 2016/2017[13] (this must cover students at technical and vocational colleges, as well as universities), the deferring of registration fees till March 2016, and the scrapping of registration fees for students who are eligible for NSFAS. 
The R 4.5 billion additional funding allocated to NSFAS will be used to provide for loans amounting to R 2.5 billion for 71 153 identified students, who qualified for NSFAS but were either partially funded or not funded at all over the past three academic year; while the remaining R2bn will be used to ensure that any NSFAS qualifying students, in the system, are supported financially to continue and complete their qualification.[14] NSFAS has communicated with all 26 universities detailing the process to follow in the disbursement of the R 4.5 billion. With regard to the administration of historical debt, NSFAS will only pay the capital amount owed by the student to the university and any interest charged to the account will be reversed.[15]     
These are great leaps in addressing the issues raised in the #FeesMustFall protests but they fail to address the immediate concerns and frustrations of the ‘missing middle’. This cohort of students has been told that they are still responsible for raising money to cover their historic debt and current fees.[16] The African National Congress has also urged those students who can afford to pay their tuition to pay them, in the interest of social justice.[17] Both statements make no mention of measures taken to address the ‘missing middle’ for the current academic year.  
In another statement NSFAS chairman Sizwe Nxasana said the criteria for NSFAS funding would remain the same in 2016 and only change in 2017 when the new funding and comprehensive model - which would include the so called ‘missing middle’ -  will be piloted at certain universities and full implementation is expected in 2018.[18]  


The #FeesMustFall movement has forced government to reconsider its current student funding model. The student protests have exposed the complacency of current leadership, in particular the Minister of Higher Education and Training, Blade Nzimande. The #FeesMustFall protests challenge the ANC on its core policies and election promises. They further contest priorities, resources and their management by the government. In 1994, the ANC election manifesto pledged to “open the doors of learning” and make education free for the poor.[19] Students have come to the doors of the ruling party asking them to deliver on their promise and the constitutional mandate of progressively making further education available and accessible.[20] Making progress won’t be easy in a time of fiscal austerity.
Anele Mtwesi

[4] Ibid.
[5] Ibid.
[6] Ibid. 
[7] Ibid.
[9] Ibid.
[10] Ibid.
[14] Ibid.
[15] Ibid.