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SARS to hunt fees

The government’s plan to fund “missing middle” students could result in SARS being responsible for ensuring that billions in student loans are repaid to the newly established Ikusasa Student Financial Aid Programme.

The programme is the brainchild of a team set up by Higher Education Minister Blade Nzimande to tackle the student funding debacle, which resulted in the government pledging for the first time to fund students from middle-class families with incomes below R600,000 a year.

“We want a situation in which, when a person graduates and has found employment, or earns an income, automatically, through the SARS system, there would be, as with UIF or the skills development levy, a deduction from a person’s salary to repay the component of a loan,” said Sizwe Nxasana, head of the ministerial team.

In a report released for public comment last week, the team proposed an audacious plan that would result in the government eventually raising the bulk of university funding through private capital investment and money from business.

The report estimates that R42-billion would be needed to fund the programme next year.

The provision allowing SARS to recoup student fees was proposed to counter the debt problems faced by the National Student Financial Aid Scheme, which is owed R14.7-billion by former students.

Other key proposals include:

  • Giving priority to students studying to obtain qualifications to enter “occupations in high demand”, increasing the probability of loans being repaid;
  • Giving employers the option to take on the debt of a beneficiary of the Ikusasa programme and benefit from a tax incentive;
  • Changing the Broad-Based Economic Empowerment Act toallow a company’s skills development expenditure to be directly invested in Ikusasa;
  • Tax exemptions for individuals and companies that make donations to the Ikusasa programme; and
  • Free tertiary education for “very poor” students for their first three years of study.

Unlike the NSFAS, Ikusasa would not provide 100% loans to all students, and applications would be processed centrally instead of at individual universities.

Students will get a grant or partial grant from day one.

Some students will be granted only partial loans.

Nxasana said those who qualified for partial loans would have to find the rest of the money themselves, through family contributions or bank loans.

The report said the NSFAS model had “negative public views regarding the recovery rate of loans and, according to funding experts, would not be appetising to private investors”.

Nxasana said this was the rationale for the use of SARS to help recover loan payments and was also a key component to the success of the model.

The move would require legislative changes.

The team said it expected the amount raised through capital markets could increase from R2-billion to R10-billion in three years. It said skills-development funding could increase from R8-billion to R15-billion in the same period. The new model has had mixed reviews. Efficient Group chief economist Dawie Roodt called it “regressive”.

“Any kind of financing of university students is regressive as far as equality is concerned because, even if you fund the poorest of the poor of university students, they are still better off than those who don’t go to university at all – poor non-university students will not get this benefit,” he said.

The R42-billion price tag could affect the country’ s international credit rating, he said.

Dr Nic Spaull, senior education researcher at Stellenbosch University, said the model was “definitely a workable solution which addresses the underlying question of where the money will come from”.

He said the Ikusasa funding model was sustainable, would decrease financial exclusion and would be cheaper than funding free higher education for all.

“The state will probably still have to raise taxes to fund its portion of the public-private partnership but it would be able to recoup some of these costs from successful graduates.”

Ikusasa funding will be piloted this year at some universities.