Johannesburg - The higher education funding model proposed in the Heher Commission report is a risky but noble plan that can be used as a starting point towards a more viable method than free education. But its success depends on government’s final position.
This is according to Wits University Vice-Chancellor Professor Adam Habib and economist Dawie Roodt, after President Jacob Zuma this week released the report into the feasibility of fee-free higher education and training.
“It is a much more organised format than NSFAS (National Student Financial Aid Scheme), which had a huge problem in collection (of student loans) because the collection will now be through Sars (SA Revenue Service). It’s is a much more decisive mechanism for collection than NSFAS,” said Habib.
He was referring to the recommendation that NSFAS be replaced by the income-contingent loans (ICL system) sourced from commercial banks as funding for university students, among other proposals that would have to be explored. The loans will become payable once students have graduated and attained a specific income threshold.
READ MORE: #FeesCommission: Free higher education for all not feasible – report
Following the release of the report, all of the big four banks have been cagey in their reaction.
Standard Bank spokesperson Ross Linstrom said it “welcomed proposals intended to increase access to tertiary education in a responsible and sustainable manner”.
“In this spirit, we will be examining the proposals with a view to finding more ways to support wider access to tertiary education,” he said.
Sharda Naidoo, Nedbank’s spokesperson, said the government “has had no direct consultation on this important matter with Nedbank”.
“We are also not aware of any consultation with the broader banking sector before the release of the report,” she said, referring enquiries to the Banking Association of South Africa.
Absa and FNB said they were still studying the report and referred enquiries to the Banking Association of South Africa (Basa).
Cas Coovadia, MD of Basa, said the banks had indicated “a willingness to engage on the basis of data and information” that the government should provide.
“In light of what we read about an intervention from the president, we do need clarity from government on whether it sees the Heher report as the basis for consideration on a way forward or not.”
Habib said while the proposal is risky, it can be used as a benchmark for a more sustainable funding model in the long term.
“I think the model that the Heher Commission put forward a noble goal and you want to see it grow. So I think it should be conceived perhaps as a starting point.
“Yes, there’s a risk with the students (repaying the loan), and what you could end up doing is inheriting a big debt.
“But the banks have no worry (granting the loan) because the state offers a guarantee to pay the debt. But it can’t be the long-term solution, and I think that over the next couple of years, we should migrate from that model to a more grant-based model.
“That can happen as the economy improves, as we widen the tax base, as we consider a graduate tax and as we consider the redeployment of the skills fund and other cost structures.”
Economist Roodt agreed that the proposed model could form the basis for a feasible plan in future.
“The question is, is it good to replace NSFAS with banks? Yes, I would say it is, and one of the obvious reasons is that (with) the banks, that’s their jobs, they do these sort of things,” adding that the success of the model hinged on the banks being given the right to determine their own criteria.
“I don’t know whether this is a blanket loan for all students and whether the banks will be allowed to implement their own criteria. If the banks will be allowed to decide for themselves who they are going to lend their money to, that would be even better because they will introduce some sort of criteria.
“You can’t just give everybody a loan. If they are forced to provide loans for everybody, then that’s not a good thing. But if they can use their own criteria to mitigate risk, at least that would be good.
“And then, of course, the banks are much better to collect these loans than what NSFAS is at the moment.”
Like Habib, he highlighted the long-term risks.
“It is just another potential debt for the state if the students can’t pay or don’t want to. So it’s essentially the same guarantee as Eskom, and we the taxpayers will essentially take the burden for that, that’s the risky part.”
READ MORE: 10 things to know about the #FeesCommission report
Roodt and Habib said it was important that Zuma state government’s position on the report.
“The point is we need to know what government says because there is a rumour that Zuma doesn’t like it and wants to go with the Masutha proposal,” Habib said, referring to a Sunday Times report that Zuma was planning to introduce free education across the board through a controversial funding plan allegedly devised by his future son-in-law Morris Masutha.
The plan could see the cutting back of departmental budgets across government to make R40 billion available for the 2018 academic year.
Roodt said: “We are all speculating whether the Heher commission was a good thing or not, but it’s totally irrelevant because what if the president decides he’s going to have a free system. That’s the elephant in the room, what is going to happen?”