ANNUAL REPORT 2013/14 DEPARTMENT HIGHER EDUCATION AND TRAINING

ANNUAL REPORT 2013/14 DEPARTMENT HIGHER EDUCATION AND TRAINING Status and Effectiveness of Student Funding in South Africa Standing Committee on Appropriations 21 October 2014

Overview • Introduction • Background • Current challenges • Value for money • Strategies to support (NSFAS) students’ success • Strengthening linkages and partnerships • Improving efficiencies and effectiveness

Introduction • One of the major shortcomings of NSFAS is that funding falls far short of demand. The demand for financial assistance far outstrips supply • Some universities spread the allocation to as many students as possible by granting smaller awards to a larger number of students, a practice called “top slicing” • This practice results in historic debt and shortfalls in the system • In 2013 an additional R1 billion was sourced from the National Skills Fund (NSF) to assist with a reported shortfall of R2.6 billion for university students

Introduction • This was a once off amount and was not part of the MTEF baseline • To maintain the level of funding and number of current students an additional R1 billion (escalating at inflationary rates per annum) is required • To fully fund all qualifying NSFAS students and meet the goals of the National Development Plan an amount of R36 billion for university and R15 billion for TVET students is required over the 2015 MTEF period. A total of R51 billion

Background • The cost of higher education in South Africa has escalated significantly over the years, both from a government expenditure perspective as well as individual family expenditure per student • The cost of higher education contributes to the increasing inaccessibility of higher education for many South Africans who are unable to raise funds for their studies • Between 1991 and 2014, NSFAS funding for loans and bursaries for university and TVET students provided from the fiscus by the Department increased from R441 million to R6.02 billion

Background: MTEF and NSFAS recoveries • Allocations to universities will increase from R3.3 billion in 2011 to R4.3 billion in 2016 • Number of students supported will stabilise at current levels assuming current levels of support are maintained and fees do not increase radically and does not include FCS for all

Background: TVET MTEF Allocations • 100% bursaries • 80% of total enrolled students covered for college fees • 20% of bursary recipients covered for travel and accommodation • Student enrolment projected to increase at the rate of 6.1% per an

NSFAS Income Sources • In 2014 NSFAS will disburse a total of R9.2 billion • DHET Universities (include recoveries) - R4 325 898 040 DHET – TVET Colleges - R2 107 740 999 National Skills Fund - R 1 065 526 631 TRC Reparation - R 4 214 886 DBE – Funza Lushaka - R 958 391 509 SETAs - R 406 830 418 Other sources (Government, NGOs, etc.) - R 326 873 597 NSFAS recoveries (other) - R 13 167 000 Nedbank bursaries - R 10 120 842

Ministerial Review of NSFAS • Major finding: • Despite significant increases in NSFAS allocations, available resources are not adequate to cover all current financially needy and academically successful students in universities • First time entry students are particularly at risk of not being funded • Recommendation 1: • Full state subsidisation of poor students and those from working class backgrounds, to be progressively realised over a specific period

Ministerial Review of NSFAS • Following the NSFAS Review, the Department proposed thatadditional funds be made available to implement a phased-in approach to incrementally introduce free undergraduate education • A Bid to National Treasury was submitted which resulted in additional funding of R1.6 billion being allocated for University and TVET student loans and bursaries. This created a new baseline • The final year programme was introduced on the basis of this funding. This was seen as the first phase of introducing free education to qualifying NSFAS students

Ministerial Review of NSFAS • Recommendation 2: • Income-contingent loan scheme for children of public sector employees (family income threshold of R300 000) • Recommendation 3: • Income –contingent loan scheme funded by the state or other agency for students from lower middle-income (‘missing middle’) • NSFAS was requested by the Minister to explore ways in which to fund the students who do not meet the means test (missing middle) • NSFAS is engaging with Public Investment Corporation and Government Employee Pension Fund

National Development Plan • … all students who qualify for NSFAS must be provided access to full funding through loans and bursaries to cover costs of tuition, books, accommodation and living expenses (i.e. full cost of study) • Students who do not qualify should have access to bank loans, backed by state sureties • Both NSFAS and bank loans should be recovered through arrangements with SARS. Service-linked scholarships should be available in areas such as nursing, teaching and social work • Consider extending the NSFAS to qualifying students in registered private colleges • Implication: Significantly greater resources are required to back NSFAS if these are to be realised

White Paper for Post-School Education and Training • The White Paper makes a commitment to progressively introduce ‘free education’ for the poor in South Africa as resources become available • Sets a target of 1.6 million students in universities, 2.5 million in TVET Colleges and 1 million in Community Education Colleges by 2030 • Number of Grade 12 learners who can gain entrance to university is estimated to increase from 172 000 in 2013 to 250 000 by 2019

Working Group on Fee- Free Higher Education • Ministerial Working Group was appointed in 2012 and advised: • fee-free university education for the poor is feasible if built on the current NSFAS cost sharing and recovery model • Costing of implementation is dependent on a range of parameters and policy choices (eg. definition of ‘poor’, level of rebates for academic success; % interest charged ) • will require significant additional funding • will require improvement of NSFAS administrative and cost recovery systems and strengthening of NSFAS governance • requires strengthened student support at institutional level to improve chances of success and return on investment

Working Group on Fee- Free Higher Education • The base model costing included (amongst others) the following assumptions: • Full cost of study for all qualifying students • Family contribution on a sliding scale (means test) • A threshold of R217 000 (current threshold is R122 000) • 20% rebate for academic success in first years (current 40%) and 40% rebate in the final year (current 100%) • % interest to be charged set against the All Bond Index (ALBI) (higher than the current NSFAS policy) • Cost to fully fund all qualifying NSFAS students in the 2014 (new) cohort would require R15 billion in loan advances (calculated in 2010 prices and does not include current students)

Current Challenges • High expectations amongst students that funding for poor and working class students to cover full cost of study (FCS) must be made available by government (based on Polokwane resolution and widespread belief that higher education is a fundamental right): • threat to the stability of institutions due to increasing student protests and demands • Insufficient appropriated funds for NSFAS to support all qualifying students at FCS (current threshold of R122 000 pa): • projected student enrolment and graduation growth in universities, to meet the NDP targets and high level skills needs of the country, are at considerable risk unless further investment is made • It is estimated, on the basis of household survey, that 45% of the student population require financial assistance

Current Challenges • Top-slicing: institutions spread the NSFAS allocation to as many students as possible by granting smaller awards to a larger number of students instead of providing FCS: • results in student debt and therefore financial exclusion the next year (problem of historic debt) • poorest students’ chances of success are diminished (wasteful investment) • University fees (i.e. tuition, accommodation and living expenses) increasing at a higher rate than NSFAS funds: • - 4.6 % increase in NSFAS allocation for 2015 academic year against an expected average of 9% increase in university fees implies fewer and fewer students supported at FCS unless NSFAS funding increases • - Universities argue they are forced to increase fees to keep up with higher education inflation and eroding state funding (on average 40% of costs covered by subsidy)

Current Challenges • Non-alignment of government’s financial year and universities’ academic years: • - Funds available in April, while students register and require assistance in January / February • Missing middle funding: students who do not meet the means test for the current funding criteria and equally do not qualify for funding from the commercial institutions given their level of household income: • Students most likely to succeed are excluded from higher education study • Department has requested NSFAS to explore options and advise the Minister on a model for funding • Institutional incapacity to administer and report on financial aid funds utilisation

Current Challenges • NSFAS administration: • Weak recoveries by NSFAS • Weak NSFAS fund raising strategy • Weak regulations governing allocation of funds at institutional level (no NSFAS Guidelines sent to institutions in 2013 and 2014) • Lack of an effective NSFAS communication strategy • Reports of applicants, their parents and financial aid officers involved in fraudulent and corrupt activity – need to root out fraud to ensure maximum effectiveness • Country’s development and future prosperity at risk should too many young people be excluded from university and TVET learning opportunities – ticking time bomb of NEET youth

Current Challenges : MTEF 2012/13 – 2016/17 • The number of students covered by NSFAS will not be able to grow without the injection of additional funding • NSFAS will not be able to maintain current university student numbers without an additional injection of R1 billion (increasing at inflationary rates) in the baseline • Continued increases in institutional fees linked to inflationary costs above NSFAS increases will erode the number of students supported • Current numbers includes top slicing and does not support FCS for all eligible students (if FCS implemented it will mean even fewer students can be supported) • MTSF targets: can only commit support for 205 000 university students per annum through the NSFAS drawing on all available resources

University Funding requirements: 2015 MTEF * Additional funding required over the MTEF assuming current NSFAS criteria remain the same and FCS is implemented

TVET Funding requirements: 2015 MTEF • * Additional funding required over the MTEF assuming: • 2013 student enrolments used as baseline • Average programme costs for NCV and Report 191 used • Student enrolment growth projected at 6.1% per annum • Current NSFAS criteria are applied

Value for Money • Since its inception NSFAS has disbursed R41.5 billion in loans and bursaries to over 1.4 million university and TVET students • It has significantly impacted on the expansion of the black middle class • Investment in opportunities for poor and working class students to access higher education and TVET education is of value beyond the financial aspects. • Leads to individual engagement in the productive economy and has potential to lift the economic conditions of extended families and communities

Value for Money • NSFAS commissioned a study in 2012, undertaken by the University of Stellenbosch, aimed at identifying successes and problems faced by NSFAS, including flows of students through the tertiary education system • The focus was primarily on following the five cohorts of students who entered universities from 2000 to 2004, tracking their performance. It compared NSFAS funded students to all students in the system (HEMIS) • Study indicates that university students who obtained NSFAS funding performed better than that of unsupported students

Comparison of NSFAS and general HEMIS student throughput who entered for the first time in 2000 and 2004 A new study to determine reliable throughput data further cohorts of NSFAS is currently being conducted.

Support for University Students at Risk • Data show that students from poor socio-economic backgrounds are disproportionately at risk of failing and dropping out of their studies • Over recent years, the Department has provided considerable resources through the Teaching Development Grant to address the needs of these students. Examples of these include: • Establishment and expansion of ‘First Year Experience’ Projects, which take a holistic view of the academic and psycho-social (non-academic) factors that impact on student performance, particularly during the difficult school-to-university first year transition. All universities now have some version of this

Support for University Students at Risk • Greatly expanding provision of mentoring and tutorial support, targeted particularly at first year, at risk students • The development and strengthening of Writing Centres and other forms of language support (including the development of multilingual online concept glossaries) • Resources to support the development of e-learning approaches and materials to enhance student learning both in and outside of the classroom • Foundation provisioning programmes which support underprepared students though extended curriculum programmes • Improved data analytics at institutional level to identify at risk students and develop interventions to support them

Support for TVET Students at Risk • Ensuring the development of quality student textbooks according to curriculum requirements • Training of lecturers in different focal areas e.g. implementation of new and revised subjects, practical ISATS, etc. • Introduction of foundational learning programmes to address numeracy, literacy and problem solving skills • Placement of lecturers in industry (lecturer work exposure) assists lecturers to easily integrate the exposure into their daily lessons • Placement of students (work based exposure) assists with the alignment of theory and practical and thus improves students’ understanding of the curriculum

Support for TVET Students at Risk • The Department has secured donor funding to strengthen the implementation of student support, in particular academic support programmes in TVET colleges (computer based programmes and extra classes) • Annual analysis of exam results for both the NC(V) and Report 191 assists colleges identify and focus on problematic subjects in their respective colleges • Use of the Selection and Placement tool during registration assists colleges to identify “weak” students and develop proper interventions to assist those that have academic gaps in numeracy and literacy

Linkages and Partnerships • NSFAS is working on establishing and strengthening linkages and partnerships with other government departments, the SETAs and private sector to lever additional funds • Additional funds already sourced from provincial departments, national departments, NSF and SETAs • Partnerships forged with SARS, SASSA, Department of Home Affairs, etc. to verify the validity of applicant information (fraud prevention strategy)

Remedial Actions • NSFAS has implemented a number of actions to address the recommendations of the Ministerial review report, including: • pilot implementation of new NSFAS student centred model • Full cost of study up to a maximum of R64 000 per student available to students in 2014, providing financial aid for registration, tuition and residence fees, and allowances for accommodation, food, books , travel • Academic performance incentivised by converting up to 40% of the annual loan amount in the first years of study, and 100% in the final year, into a bursary if all modules are passed • Laptops and tablets recognised as learning support materials and being provided in support of institution’s e-learning strategies

Remedial Actions • Policy dialogue constituted between DHET, NSFAS, SAUS, HESA, UCCF, NT, DPME and CHE to ensure common understanding of challenges and address policy development for an effective and efficient administration of NSFAS • Terms of reference for a forensic investigation to identify fraudulent activity with respect to NSFAS have been developed. Department to implement and prosecute where appropriate • Improved Department support to institutions for improving teaching and learning development to ensure students at risk and from poor economic backgrounds are supported to succeed

Thank You

ANNUAL REPORT 2013/14 DEPARTMENT HIGHER EDUCATION AND TRAINING