The National Student Financial Aid Scheme (NSFAS) briefed the Committee on its history since its inception. It was currently responsible for managing the financial aid to students in 50 FET colleges and 23 higher education institutions. The key service offerings to students, institutions and donors were outlined. The budget was presented, noting that although there were increases in both loan and bursary funds and administration allocations, the total available was not enough to cater for all needs. The difference between loans and bursaries was explained. The NSFAS Board supported the introduction of free higher education, and plans to expand support to include the ‘missing middle’ group, to assist the 700 000 youth neither in employment nor in training, and to expand financial aid for students in the Further Education and Training sector. However, there was a challenge that fund growth and internal resources had not kept pace with the rapidly expanding responsibility for management of funds. The six strategic goals of NSFAS were outlined. These included expanding the pool of funds available, managing the funds more effectively, promoting internal efficiencies in the processing of student awards and claims, managing the system more effectively by providing technologically advanced solutions internally and with donors, better communicating and managing relationships with all NSFAS stakeholder groups and targeted audiences; and undertaking research to inform the effective utilisation of funds.
Members remarked that in the Eastern Cape there were inaccessible areas, and asked whether NSFAS knew how many high schools there were in each province. Reference was made to the problem of ‘ghost schools’, no longer in existence, but still nominally funded at the expense of more needy children. They enquired how funds were recovered from students who terminated their studies, when loans became repayable, the rate of interest, and whether students not repaying would be blacklisted, and how they could have their names removed from blacklists. They asked about the provincial allocation of funds, the relationship between provinces and NSFAS, the accounting methods, and how the disbursement of loans and bursaries was managed by the institutions, in particular whether they had any autonomy. Members wanted further information about the location of the 700 000 students not in employment or training. They asked whether the poorest of the poor were receiving loans, why there was no budget for Mpumalanga and Northern Cape, and the reason for a greater allocation to loans, rather than bursaries. They also asked about the procedure to be followed by students when applying for funding. It was explained several times that NSFAS did not make policy but merely administered the funds and Members enquired whether it had achieved its aims, and why only 13 of 23 Higher Education Institutions were implementing the upfront funding policy. The “last resort” principle whereby students could not apply to NSFAS if they had access to other funding was questioned, as well as the aspects covered by the funding. Members did not feel that there was yet sufficient communication in both townships and rural areas, and suggested that constituency offices and the Department of Home Affairs should be involved. They questioned why medical students were not contracted to serve internships. Members were concerned that some institutions were returning funding and asked how this was handled, questioned how often monitoring was done, and asked for a breakdown of the NSFAS administration expenditure. The Committee also questioned NSFAS disability funding and initiatives, and urged that more should be done to make students at schools aware of their options.
National Student Financial Aid Scheme (NSFAS) Strategic plans briefing
The Chairperson welcomed the delegation and stressed that this Committee was equally as important as the National Assembly committee, but that its Members were provincially based, with direct experience of their regions, and thus truly representative.
Mr Ashley Seymour, Chief Executive Officer, National Student Financial Aid Scheme, stated that he had only recently been appointed and would therefore be reporting on the budget and goals defined by his predecessor. He briefly reviewed the history of the National Student Financial Aid Scheme (NSFAS) since its inception by way of an Act of Parliament, and its subsequent management of tertiary education funds, loans and bursaries. Its mandate was to provide support for education and training to academically deserving and financially needy students. NSFAS had also been asked to take responsibility for the 50 Further Education and Training (FET) Colleges’ bursary schemes in addition to the 23 Higher Education Institutions (HEIs).
Mr Seymour outlined the key service offerings from NSFAS These included providing information, bursary funding and loan funding for students, provision of fund allocation mechanisms to benefit students, administrative support, training in grant administration, and monitoring the use of funding to training institutions. It also assisted donors and funders with recovery of loans on completion or termination of students’ terms of study, and provided mechanisms to manage loan and bursary funds.
Mr Sherman presented the budget for 2010/11, which showed clear growth from the previous year’s budget. He planned significant changes in the budget with regard to the administration portion, which would grow because of increased spending on ‘people skills’, which he stressed as a key component of the NSFAS strategic goals. He expanded on the split in the budget between loans and bursaries.
Mr Seymour referred to the Ministerial Review of NSFAS and underscored the board’s support for the introduction of free higher education and the expansion of support to include the ‘missing middle’ group from low- and middle-income working families, who were currently excluded from support. NSFAS also aimed to assist the 700 000 youth who were currently neither in employment nor in training. There was the intention to expand financial aid for students in the FET sector.
He noted that the responsibility for management of funds had doubled over the last five years for NSFAS. During this time NSFAS had received unqualified audit reports. However, internal resources had not increased in line with the increase in its responsibilities.
Mr Seymour outlined the six strategic goals of NSFAS. The first was to expand the pool of funds available for disbursement as student loans and bursaries. He stressed the importance of debt recovery and the planned review of the loan book. He made the point that only 7 000 debtors, a very small proportion of the total, were blacklisted.
The second goal was to manage the utilisation of funds administered by NSFAS more effectively. This would be done by maximising the use of funds for each HEI, and by improved communication with HEIs regarding accountability. Although there had been a demonstrable improvement in fund utilisation, greater support was needed to improve efficiency of HEI staff in Financial Aid Offices. He pointed out that disability funding utilisation was still too low at 87%. There was a policy that up to 30% of the total allocation could be claimed upfront from NSFAS, in order to address concerns by the Ministerial Review about registration costs. However, during 2010 registration, only 13 of the 23 HEIs applied the policy. NSFAS planned to tighten reporting and submission of claims deadlines and had allocated R500 000 towards training of Financial Office staff. Loan and bursary budgets had grown over the past year.
The third strategic goal was to ‘push the payments’ by strengthening internal efficiencies in the processing of student awards and claims, to ensure that the funding reached its target population. It was necessary to restructure the inherited operations to separate the processing of loans and bursaries. Electronic Loan Agreements were being evaluated, and mobile phone technology would be used.
The fourth goal was to strengthen the quality of internal management and operations, in line with changing funding patterns. The system would be better managed, by providing technologically advanced solutions, both internally and with donors, thus minimising risk and ensuring best practice in administration and human resource management. Various risk management, assessment initiatives, internal audits and compliance audits of all 23 HEIs would be put in place. Fraud prevention, business continuity and other management plans would also be implemented. Planned initiatives included performance management systems and skills audits for human resources, and IT developments to separate factors such as loans and bursaries, universities and FET Colleges, and to create portal services for institutions and donors.
The fifth goal was to effectively communicate and manage the relationship with all NSFAS stakeholder groups and targeted audiences, including targeting prospective students in rural and urban South Africa, with alternative communication channels, and engagement with those responsible for marketing opportunities. NSFAS planned large events, the use of targeted media, including radio, the use of SMS messages, career exhibitions, open days, school visits, and feedback from students regarding their knowledge of NSFAS.
The final goal was to undertake research to inform the effective utilisation of funds, so that NSFAS could advise the Ministry on matters relating to student financial aid. There was a need to build relationships with organisations in the higher education sector. In line with the Ministerial Review recommendations, the allocations models and the means testing would be enhanced. Strategic planning and policy development would be assisted by strengthening management information systems.
Ms D Ranto (Eastern Cape, ANC) remarked that in Eastern Cape there were inaccessible areas beyond rivers and mountains. She asked whether NSFAS knew how many high schools there were in each province. She referred to the problem of ‘ghost schools’ that were no longer in existence, but still nominally funded at the expense of more needy children.
Mr Seymour replied that NSFAS was engaging with the Department of Basic Education (DBE) to achieve more through collaboration. Although NSFAS’s role was chiefly administrative, it was communicating with specific provinces, particularly the Eastern Cape, to solve problems at a provincial level.
Ms Ranto asked how funds were recovered from students who had entered the university with no assets and then terminated their studies, and what rate of interest would apply to such recovered funds.
Mr Seymour explained that the loan received only became repayable when the student was employed and was earning more than R120 000 per annum. Repayment was then income-linked. A person qualifying for repayment of debts, but reneging on such responsibilities, would be pursued. Overdue funds were charged at a fixed interest rate per calendar year. This rate was always below the repo rate, in recognition of the benevolent nature of the financial aid scheme. It was currently set at 5.8%, slightly over one-half of the prime rate.
Ms Ranto asked what mechanisms were put in place to avoid students being blacklisted and denied access to bank accounts.
Mr Seymour explained that blacklisting was always a last resort. The NSFAS Act compelled employers to deduct owing funds at source, where the employee met the criteria of being employed and earning above the repayment threshold. Mr Seymour acknowledged that this gave NSFAS problematical extra-judicial powers, so NSFAS would seek legal advice on amending the legislation. When NSFAS requested that employers deduct from the payroll, this was also reflected inaccurately by the payroll software currently in use. NSFAS continued to encourage students to engage with it on recovery, and the repayment rate was in fact almost always lower than the legally required rate. If it was necessary to resort to court action, the student would pay these costs, which would increase his or her debt burden. NSFAS primarily aimed to recover money. Blacklisting was a last resort, and only 2% of the 400 000 debtors were actually blacklisted.
Ms B Mncube (ANC, Gauteng) asked for clarity whether the funds were divided according to province, and whether they were disbursed directly to institutions of higher learning, or to the provincial governments. She also enquired about the accounting method for such funds.
Ms Mncube wanted further information about the location of the 700 000 students who were not in employment or training. She also commented that there were many students failing examinations and not repeating them.
Mr Seymour replied that NSFAS was engaging with the Department of Basic Education to try to find solutions to this problem. He reiterated, however, that NSFAS was principally an agency for management and distribution of funds.
Ms Mncube further noted that although the numbers of students blacklisted was very small, their blacklisting had severe implications for them, including making them unable to open accounts or secure housing. She asked what enforcement mechanisms there were to persuade higher institutions not to blacklist students, and what mechanisms were in place for removing blacklisted students from the credit bureau lists.
Ms M Moshodi (ANC, Free State) asked how NSFAS would be restructured so as to give loans to historically disadvantaged students.
Mr Seymour replied that the beneficiaries of NSFAS funding were overwhelmingly, at about 95%, drawn from the poorest of the poor.
Ms Moshodi asked for a provincial breakdown of the 700 000 youths not in employment.
Ms Makgate asked what the relationship was between the provinces and NSFAS.
Mr Seymour stated that there was no formal relationship with any specific province. NSFAS was always willing to engage with all stakeholders wherever they could add value. NSFAS had already interacted with several organisations wishing to use NSFAS resources and expertise.
Mr M De Villiers (DA, Western Cape) commented that most students, on completion of their studies at universities and FET colleges, could not find employment. He asked what support there was for such students, and how the debt recovery scheme would impact on their prospects. He noted that blacklisting applied for five years, during which time it was not possible to open a bank account or buy a car.
Mr Seymour reiterated that unemployed graduates had no contractual obligation to repay their debts until they gained employment. The interest repayable on such debt was limited during this period to the basic capital.
Mr De Villiers observed that in Mpumalanga and the Northern Cape there was no budget for loans, and this was an untenable situation for poor students.
Mr Seymour observed that there was no university or FET college in these provinces, and hence no loan allocation was required.
Mr De Villiers noted that the allocation of funds to loans was far greater than the allocation to bursaries. He felt that this was skewed, since the funds were supposedly to assist poor students.
Mr Seymour pointed out that the Ministry directed the bulk of the funds towards FET Colleges rather than HEIs. It was the Minister who took the decision. NSFAS was an administrative body having an advisory role. It had made and would continue to make recommendations, but was not responsible for policy.
Ms Ranto asked about the procedure to be followed by students when applying for funding.
Mr Seymour explained that NSFAS managed funds from donors and disbursed them according to the criteria (academic or needs-based) of the donors. The criteria of some funders were purely academic. NSFAS was annually advised by various funding bodies as to available funds and the eligibility criteria to be applied when awarding the funds. The proportions of the Department of Higher Education core fund of R3.5 billion for 2010, intended for bursaries and for loans, were clearly stated. Students were advised that their eligibility was assessed academically, by admission to the university or college, and through a means test, which took into account family income and education levels and potential contributions of the student. He reiterated that the funds were intended to assist the poorest of the poor, and that civil servants, for instance, did not qualify for assistance. The funds were transferred to the relevant institutions, who in turn disbursed the funds to qualifying students. NSFAS acted as a ‘top-up’ funder. It rewarded students who had passed 60% of their course, by converting up to 40% of their loans into a bursary. FET institutions were primarily run on bursaries. The ultimate aim was to work progressively towards free higher education.
Mr De Villiers asked why a review of the loan book was necessary.
Mr Seymour replied that this was a necessary annual process in order to monitor the progress of the loans system and ensure appropriate reporting and loan recovery.
Ms Makgate asked whether NSFAS was really achieving its goals and reaching those it intended to reach. She commented on students who had passed examinations, yet lacked the finances to attend universities. She asked whether NSFAS had a purely administrative role of fund disbursement.
Mr Seymour replied unequivocally that NSFAS was not reaching all those that it should be reaching, but stated that this was not through lack of effort, but lack of funding. The ‘poorest of the poor’ constituted many people. The pool of funding was limited, and was allocated by the fiscus. The Ministerial Review had indicated that funds would need to be tripled in order to have a meaningful impact on all those in need. NSFAS was also looking for more efficient ways of using its funds. The dropout rate was high (approximately six out of every ten first year students) and their funding would clearly have been better allocated elsewhere. This was due, in part, to insufficient preparation by the schools for tertiary education. There were ongoing discussions with the Minister of Finance and others regarding the expansion of the funding pool.
Mr De Villiers referred to the capacity problems of the scheme, and the policy that up to 30% of the total fund allocation could be claimed upfront from NSFAS. He asked where there were problems of personnel capacity. He asked why only 13 of the 23 HEIs had implemented this policy. He enquired whether there was a Memorandum of Agreement compelling all HEIs to follow one criterion for handling such funds.
Mr Seymour recalled the origins of NSFAS as a small group of 11 members, disbursing funds of around R11 million. Currently its loan book rivalled the loan books of the top four banks. NSFAS had more than doubled its activities in disbursing awards. However, NSFAS had not been able to keep up in terms of personnel. The automation of the whole loan process would improve this situation.
Ms Mncube recalled that Mr Seymour, in alluding to the Ministerial Review Committee Report, had stated that universities gave students NSFAS money as a ‘last resort’. She commented that this had unintended consequences. If this funding was disbursed as a last resort, and yet some of the funds were under-utilised, then this meant that access and redress for the poorest of the poor was compromised. Some students from areas such as Mpumalanga had moved to Gauteng to study, only to be refused access to the funding on which their parents were relying. This had caused major disruptions and demonstrations. She asked how the Ministerially-sanctioned disbursement scheme was enforced, and whether it was the prerogative of each university to follow or ignore the Minister’s ruling.
Mr Seymour replied that the ‘last resort’ policy in fact protected the poorest of the poor. It prevented a student who was already in receipt of other funding from acquiring additional NSFAS funding, to make sure that the NSFAS funds were reserved for those with no other options. NSFAS was currently spreading the funds, amounting to only a few hundred million rands, although ideally billions were required. One of the NSFAS board members was the President of Financial Aid Practitioners, and NSFAS reported to all institutions regularly, informing them of what funds were available. Although only 13 HEIs currently utilised the upfront funding, he was confident that this practice would soon spread to all 23 institutions. NSFAS advised the HEIs that it would only support full cost of tuition, including books and meals, but some institutions, without NSFAS approval, had ‘top-sliced’ to spread the funds more widely, but more thinly. This raised debates around the issue of academic autonomy.
Ms Mncube referred to the direct and indirect communication initiative, commenting that the focus was on rural areas only. She stressed that townships also had problems and many students in townships were not aware of their opportunities. She suggested that communication could be assisted through Members of Parliament, Constituency Offices, Department of Home Affairs, or any other means, to get the information out to its intended audience, regardless of their access to television, newspapers or other media.
Ms Bonnie Feldman, Communications Officer, NSFAS, responded that in fact it was not only the rural areas that were being targeted, but this was an expansion on the former policy only to communicate with urban areas because of ease of communication. She endorsed the suggestion of utilising provincial departments to expand communication. NSFAS was currently working with many stakeholders, including the City of Johannesburg, and was also interacting with several other non government organisations (NGOs) on programmes, career exhibitions and other communications opportunities. It planned to formalise its communications in a more defined way. NSFAS had participated in the training of Life Orientation Officers. It aimed in the long term to use NGOs to disseminate information. There were currently 23 NGO partners, all of whom worked on the ground in their respective areas and had local knowledge.
Mr Seymour added that although NSFAS was based in Cape Town, its operations were widespread.
Ms Moshodi asked why medical doctors were not contracted to serve, for as many years as they had studied, in an area determined by the Department of Health.
Mr Seymour responded that this was beyond the remit of NSFAS. The bonded bursary was one of the recommendations put forward by the Ministerial Review, in working towards progressive free higher education.
The Chairperson asked why, when there were claims that there was a lack of funding, institutions returned funds unused. She asked if this indicated that there were problems with administration. She asked for details of NSFAS’s strategic plan to address the fact that it was not achieving its goals.
Mr Seymour countered that in fact NSFAS had reached its objectives. It had been able to administer and manage the funds at its disposal. It was, however, limited in what it could achieve by the funding available. Although there was income from loan recovery and investments, the Ministry was aware of the need to expand the funds. The question remained as to how this was to be achieved.
The Chairperson agreed that NSFAS was compliant in disbursing funds, but still wanted to hear why funds were returned unutilised.
Mr Seymour responded that the credit returns did not constitute a significant proportion of disbursed funds. Credit returns occurred when, for instance, a student in receipt of funding decided, for instance during the second semester, that his course was not suitable, and withdrew. The funding that was returned could only be redeployed if there was a suitable application for funding from another student. NSFAS engaged with institutions on a quarterly basis to assess funding uptake, and was considering doing this monthly. He stressed that the upfront fee (in itself only a small portion of the whole funding amount) was only available for existing applications.
Mr Seymour added that NSFAS made it very clear, before registration, that upfront funds were available. However, some universities, because of cash flow concerns, chose to refuse to register students who could not pay, although it was these institutions that would be first in line to apply for upfront funding. Those institutions that were better organised tended to wait for their own funding allocation. He reiterated that by the end of the year, all 23 institutions should have taken up their funding.
The Chairperson referred to the Minister’s clear indication that students be allowed to register even though they had no funds, and asked how the Minister’s policy would be enforced.
Ms Mncube referred to the 13 institutions adhering to the scheme for registration 30% of allocated funding could be made available upfront. She asked whether it was the prerogative of the Registrar of a university to bar access to the university because of lack of funds.
Mr Seymour affirmed that it was the prerogative of the Financial Aid Officer to act independently. However, in 2009, 99% of institutions had taken up their full allocations, and some had taken up over 100% of their allocation, using other unused funds.
Ms Mncube asked how often disbursement to students was monitored. She made the point that the earlier that extra funds were made available, the more usefully could they be redeployed.
Mr Seymour said that monitoring currently occurred quarterly, but this would be increased to monthly monitoring. The date for the final statement for the year was also being brought forward to November of the current year.
Mr De Villiers asked about the 13 compliant HEIs.
Mr Seymour stressed that funding would not be disbursed until there were specific loan applications. He added that at some institutions, where students resided off-campus, a ‘flat fee’ arrangement was in place. When this flat fee was exceeded, tensions arose. The intention was that funding went first to tuition fees for the current year, then to accommodation, including meals, and then to books. Mechanisms such as card systems were being explored to implement this policy.
Mr De Villiers noted that many students were required to buy their own refrigerators and microwaves in order to prepare food. Often their parents were ill equipped to support even themselves, let alone assist their children in providing such equipment or transport costs. He asked whether there was any allocation for such purposes.
Mr Seymour explained that funding was intended for accommodation, meals, books and tuition fees, but excluded transport from home to the university.
Mr De Villiers asked for a breakdown of the NSFAS administration expenditure in terms of portions allotted to salaries, administration and other items.
Mr Seymour said that the NSFAS website gave a breakdown of the organisation’s operating expenditure, and also contained the Annual Report, with explicit details of expenditure. The report had also been tabled to the National Assembly. He offered to provide copies of this report to members.
The Chairperson requested that the document be provided to members.
The Chairperson urged that there was a strong sense that government was not doing enough in terms of disability funding. She asked if NSFAS plans also covered an awareness campaign, and the mentoring and training of staff.
Mr Seymour acknowledged that utilisation of disability funding for the past and the current year were not good, but there was improvement in uptake. Certification of disability had been required every year. NSFAS was motivating for the relaxation of this requirement, on the basis that disability was likely to persist for many years. NSFAS had also motivated for extension of disability funding to cover additional necessary equipment and support for disabled students. The training of Financial Aid Officers (FAOs) was in line with a number of guidelines, including the National Credit Act. Outreach off-campus was not the responsibility of the FAOs. NSFAS, together with several NGOs, invited students to engage with the relevant organisations and advised them of the available funding opportunities.
Ms Mncube pointed out that students did not understand their options, urging that such information be made clear at school level.
Mr Seymour described a planned student body intervention aimed at both high school and HEI level. He noted that two of NSFAS board members were drawn from student leadership.
The Chairperson applauded the move to intervene in the provinces. She recalled the frustration of school principals, concerning excellent students who could not access further education through lack of information. She noted that after their matriculation, successful school graduates were paraded and lauded by provincial departments, yet would be abandoned without further assistance later, without meaningful follow-up. She also commented that most NGOs focused on easy areas, rather than deep rural areas. They were not reaching out to those who really needed assistance.
The meeting was adjourned.
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