Fees Commission's contingency loan model gets more criticism

2017-11-17 20:07
University fees report. (Supplied)

University fees report. (Supplied)

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Cape Town – The Heher Commission’s recommendation that a contingency loan model be considered to fund higher education, has been criticised from across the ideological spectrum.

On Friday the DA and lobby group Equal Education (EE) joined the UDM and EFF in condemning the recommendation.

READ: Contingency loan model will create to debt-trapped students - UDM

EE explained how the Income Contingent Loan (ICL) model would work.

According to the lobby group, students would receive a loan, made to them through commercial banks, which they have to repay once they receive an income appropriate to their repayment obligation.

The commission recommended that the state either purchase the loans or guarantee their repayment.

In turn, the financial stability of the ICL system would be ensured through the use of unclaimed pension fund benefits, on condition that the state guarantees repayment if a demand for the unclaimed pension is lodged.  

"The state, already saddled with enormous debt, takes on the secondary liability of paying back the banks should students default on their loans," said EE in a statement.

The report furthermore recommends that the South African Revenue Service (SARS) collects the student loan repayments.

"However, the suggestion that SARS as a public state body will collect funds on behalf of the private banking sector is a serious cause for concern, as a state body which is accountable to the public would be acting in the interests of private profit-making corporations," said EE.

EE is further concerned that the model also did not take into account "black tax".

"As for the student, they would be entering into a debt-agreement that offers no more than a deferred liability," said EE.

Not sustainable

The UDM and EFF had similar concerns.

UDM chief whip Nqabayomzi Kwankwa said it would create an army of debt-trapped graduates who have not even had an opportunity to earn an income.

"This commodifies education," he said in a statement.

"South Africa’s unscrupulous banks will be cash flushed by charging students exorbitant fees and interest rates on risk-free loans that are fully backed up by government guarantees."

EFF spokesperson Mbuyiseni Ndlozi added: "We know already that South Africans are over-indebted. Thus, young people will simply transition from youth to adulthood in indebtedness."

He said the commission was asking the country to position the responsibility on future taxpayers, adding that it was not sustainable.

DA MP and spokesperson on higher education, Belinda Bozzoli, said the commission also proposed penalising students who repay their loans faster than anticipated, or who opt out of taking a loan, with an ‘equalisation fee’ – essentially punishing students who wish to contribute to the stability of the system.

"The ICL proposal seemingly has little support from students, banks or civil society and would, therefore, be hard to implement. There is no clarity as to where the government backing would come from. Translating it into policy would take a long time," she said.

READ: Universities SA concerned about proposed fees funding model

She said, since National Students’ Financial Aid Scheme (NSFAS) loans were already provided to hundreds of thousands of students, it seemed strange to create an entirely new, expensive and potentially cumbersome system.

Especially when the commission also recommended that NSFAS loans could be retained for Technical Vocational Education and Training college students.

"A further concern is the suggestion that unclaimed pension benefits and Unemployment Insurance Fund (UIF) surplus funds be used to finance the various funding needs of higher education. Given the tendency of the current government to loot the public purse, granting access to these funds contains the risk of opening them up to appropriation for other expenses, like bailing out SAA," she said.

Read more on:    da  |  udm  |  eff  |  nsfas  |  education  |  university fees

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