Soaring loans outstrip repayments

2014-01-26 14:00

At first glance, the loan book of the National Student Financial Aid Scheme (NSFAS) looks unmanageable. At billions of rands in loans against just millions in repayments, it does not compare favourably with a similar student assistance scheme in the UK.

The scheme here is mostly funded by government.

Its annual report for 2013 shows that, in the 2012 academic year, it awarded R7.7?billion to almost 400?000 students at public universities, further education and training colleges, and other institutions such as agricultural colleges and national institutes of higher education. This covered tuition fees, accommodation, food, books and travel.

Repayments made in the 2013 financial year were at almost R540?million, a slight improvement on the previous year’s figure of R539?million.

In contrast, the UK Student Loans Company, which is also government-owned, collected £1.7?billion (R31.2?billion) in loan repayments against £10?billion in loans, grants and tuition.

But NSFAS boss Msulwa Daca indicated it was not that simple: 40% of a loan is converted into a bursary when a student doing a three-year course passes the first two years.

On passing the final year, the entire loan granted during this year would be converted into a bursary. This meant more than half of the loan book was made up of bursaries.

But it was difficult to account for it as such because “you only know at the end of the year they are going to pass”, said Daca.

There were also full “teaching bursaries” granted to students on condition they work as teachers after graduation. Similar bursaries for disabled students and those interested in social work also made it on to the loan book.

Most of the rest of the loan book was not repayable, as many of the recipients were still studying. The scheme only starts collecting once they graduate and are earning more than R30?000 a year, according to Daca. The scheme does not charge any interest during the years of study.

“[We don’t do that] even in the first year after graduation because we know you’re still finding a job,” said Daca.

Interest charges take effect in the second year after graduation. That is when the scheme runs into people who do not want to pay, or who simply disappear.

“At any given point in time, there are always people we are trying to get hold of,” said Daca.

The scheme has an information-sharing agreement with the SA Revenue Service (Sars), but this is limited to the taxman providing information on the name of the debtors and their employers, and not how much they earn.

Although the situation is not as bad as in neighbouring Namibia – where between 86% and 88% of graduates are not repaying loans granted by the Namibia Students Financial Assistance Fund – NSFAS has pleaded with graduates to “pay it forward” to other needy students.

Tanzania’s Higher Education Students’ Loans Board had a better performance than Namibia, with 2012 repayments at 11.5?billion Tanzanian shillings (R79?million), against its total loan book of 317.8?billion shillings, according to a research paper by Asangye Bangu, one of its directors.

Daca called it one of the most organised higher education finance agencies in Africa.

Two years ago, Higher Education Minister Blade Nzimande raised the possibility of roping in Sars to collect amounts due to NSFAS.

Daca welcomed the suggestion, but said Sars might need to deal with the legal issues around doing so.

According to Sars deputy spokesperson Marika Muller, the tax body could disclose taxpayer information to third parties only in very specific and clearly defined circumstances, including to the NSFAS chairman, to assist in executing their duties.

She said: “The provisions in law do not permit Sars to act as an agent on behalf of any other public institution to recover outstanding debt.”

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