Help for 'missing middle'

By Helmo Preuss Time of article published Sep 25, 2018

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JOHANNESBURG - Standard Bank has for decades offered loans to students to fund their education, but these required a surety to stand guarantor for the repayment and interest while the student was studying.

But now the bank offers student loans to the “missing middle”, where an individual surety is not available.

Demonstrations since late 2015 under the #FeesMustFall campaign disrupted teaching at many universities and forced (then) president Jacob Zuma to rule out fee increases in 2016 and a commitment to free tertiary education as soon as possible.

“The government is aware of these challenges and takes them very seriously. Indeed, the government remains firmly committed to progressively realise free post-school education for the poor and working class, as called for by our Constitution, and to assist middle-class families who are unable to pay. This is demonstrated by the creation of the presidential commission of inquiry into higher education and training funding, which includes universities, technical and vocational education and training colleges, as well as the substantial increases in funding to the National Student Financial Aid Scheme since 2010,” then minister of higher education and training, Blade Nzimande, said in 2016.

Higher education institutions saw their contact enrolments rise from 545759 in 2010 to 596824 in 2014 according to the Department of Higher Education and Training.

In 2014, 54percent of students were enrolled for undergraduate degrees, 28percent for undergraduate certificates and diplomas, 9percent in postgraduate below Master's, 7percent in Master's and doctoral degrees and 2percent in occasional courses.

Tuition is, however, only a part of a student's cost as there is food, accommodation, books and transport that need to be funded as well. The National Student Financial Aid Scheme provides assistance to poor students, where the parent's annual income is less than R100000, but it is the “missing middle”, where the income is between R100000 and R600000, that were unable to go to university as they could not find a surety of sufficient financial standing acceptable to the banks.

It is to address this shortfall that Standard Bank has partnered with tertiary institutions and, in some instances, third party funders, to bridge this gap.

“We're aware that we need to address the issue of the ‘missing middle’, so we have been able to tailor a student loan that does not require an individual surety, where the tertiary education institution or a third party funder provides risk-based collateral, which is leveraged as equity," said Keshnie Hussain, a senior manager in personal lending products at Standard.

"We also have flexibility in terms of the repayment of the loan as it's a developmental credit instrument, so we make sure the repayment amount is affordable for the student once he/she has found employment. The loan does carry various options of insurance ranging from death only during the study year to more comprehensive insurance.”


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