1. 17 March 20101 Department of Higher Education and Training PRESENTATION OF REVIEW COMMITTEE REPORT: NATIONAL STUDENT FINANCIAL AID SCHEME

2. 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 20102

3. 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 20103

4. 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 20104

5. 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 20105

6. 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 20106

7. 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 20107

8. 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 20108

9. ALLOCATION FORMULA (1) A Sample of HEIs HEIAverage NSFAS Award FCSRatio UCT21 369,5954 6102,6 UFH10 858,6032 3403,0 UP22 657,2847 6452,1 UL (P’KWANE)16 935,4241 0692,4 WSU (B’WORTH) 6 615,9225 9833,9 March 20109

10. 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 201010

11. KEY FINDINGS: EXPANDING ACCESS March 201011

12. 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) 17145,25,6 259,210,0 4014,816,0 20145,36,6 259,511,7 4015,218,7 24145,57,9 259,814,2 4015,722,7 March 201012

13. FULL STATE SUBSIDY FOR FET COLLEGES (NCV) Enrolment Rate (%age group) 2,4%10%20%40% Students (NCV)124 530141 660150 874160 687 CostR4,234bR4,816 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 662539 3321 078 6652 157 330 CostR4,443bR18,337 2010 SCENARIO 2020 SCENARIO March 201013

14. 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 201014

15. 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

16. KEY RECOMMENDATIONS March 201016

17. 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 201017

18. 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 201018

19. KEY RECOMMENDATIONS: LOAN BOOK Compliance with the National Credit Act March 201019

20. 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 201020

21. 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 201021

22. 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 201022

23. Thank You March 201023