National Student Financial Aid Scheme: Transformation & proposed Central Application System

Meeting report

National Student Financial Aid Scheme: Transformation initiatives, & proposed Central Application System
Mr Zamayedwa Sogayise, Chairperson of the Board, National Student Financial Aid Scheme, noted that the funding for the National Student Financial Aid Scheme (NSFAS) had grown over the years, reaching R6 billion in 2011 and R7.5 billion in 2012. Presently, the Fund gave assistance to over one million students, with two million accounts, an increase from the 330 000 students that were covered in 2011. Every loan a student received counted as “an account”.

The transformation programme was aimed at repositioning NSFAS to provide more efficient and effective financial aid to students, and to be able to cover more students, and he explained that it had become necessary because the existing NSFAS organisation and systems had not kept pace with growth in funds, with the Loan Management System being out-dated and inadequate. Applications through Financial Aid Offices (FAOs) were not controlled by NSFAS. Students had tended to be disconnected from NSFAS, as NSFAS had no direct relationships with them until they either graduated or dropped out, as prior to that time the students dealt with the FAOs and their own universities. NSFAS had had increasing difficulty in recovering loans and the systems did not manage information or facilitate reporting to oversight structures and stakeholders. The 2010 Ministerial Review showed the need for a transformation agenda. The NSFAS transformation programme was now underpinned by three strategic goals.

Mr Nathan Johnstone, Acting Chief Executive Officer, NSFAS, expanded on these. Strategic Goal 1 was aimed at creating and maintaining an effective and efficient NSFAS administration. Strategic goal 2 was aimed at creating more student access to NSFAS, and to improving throughput and graduation rates at public universities and Further Education and Training (FET) Colleges. Strategic goal 3 was aimed at improving a student-centred financial aid environment.

In order to realise these strategic goals, NSFAS outlined six design principles that informed the architecture of the transformation plan. The first was the creation of a direct relationship between NSFAS and students, which would be achieved by targeting students as early as Grade 9. This direct relationship would be achieved through simple, transparent, reliable and responsive processes, focusing on raising awareness of NSFAS in society, as well as through better alignment to the Department of Basic Education (DBE) and Department of Higher Education and Training (DHET) initiatives for information and career guidance and education of students on accessing credit. The second design principle was the creation of the Centralised Application Process (CAP) for applications for loans and bursaries by students. The third design principle was the creation of a new central loans and bursaries administration process. The fourth design principle was for an analytical focus, to support financial aid policy development. The fifth design principle was to ensure appropriate governance and control, and it was noted that a Transformation Steering Committee (TSC) had been established to oversee the transformation process. The sixth design principle aimed at ensuring that the new NSFAS student-centred model would start operating by 2013, for implementation in the 2014 academic year. All these strategic goals and the design principles formed the foundation of the Transformation Programme.

The objectives of the Transformation Programme around introducing a new financial aid model were described. NSFAS aimed to implement a student-centred model, in which students would pre-qualify for financial aid at the time they made applications for admission to universities. Furthermore, the application processes should be streamlined, for greater efficiency, and effectiveness, including cost-effectiveness.  Financial aid money should be made available to students as early as possible in the academic year.

As part of this process, NSFAS aimed to improve its communication with learners, to make them aware of available financial assistance long before they left school. NSFAS had commenced research into a student segmentation model, in order to target its communications to the identified classes of students, and in line with the educational paths they had chosen. NSFAS wanted to reach a wider population of students who were eligible for student financial aid, especially in the rural areas and in schools with limited access to technology. One of the ways it would do this was by using cellphone and internet technologies.

NSFAS also was intent upon reducing potential fraud and corruption at institutions, to ensure that financial aid reached the students for whom it was intended. The old model had involved more third parties, and this posed a greater risk of money not reaching the students. Modern technology systems would be introduced to manage the funds that NSFAS distributed. NSFAS also was trying to reduce the  number of NSFAS students who either failed or dropped out, by offering support programmes, in collaboration with institutions and other stakeholders, to give students the best chance of graduating. This would lessen their financial burdens, and free up places for more students to receive financial aid. NSFAS also aimed to improve its recovery rates on student loan repayment, and to improve the efficiency and effectiveness of the organisational structure to better enable NSFAS to fulfil its mandate.

Mr Richard Mackinnon-Little, Technical Programme Manager, NSFAS, stated that the new student-centred NSFAS model would use interaction channels such as FAOs, Student Support Offices, Service Delivery Centres, Regional Offices, Post Offices, schools and direct NSFAS interaction with students. The interaction mediums that would be used were mobile phones, newspapers, fax, electronic mail, FAOs, Regional Offices, call centres, and self-service internet facilities that would enable students to access their accounts. There would be good system integration, to enable the new systems to communicate with other third parties. In addition, the new models would provide intermediary services to students, such as communication and application support, general process support, system support and training. The direct student services to be provided would relate to communication and marketing of the NSFAS, application assessments and the issuance of loans and bursaries. The servicing to be provided would include account administration, receipt of complaints, queries and compliments, and awareness and education about NSFAS. Some existing parts of the NSFAS system could be incorporated into the new model, but they were not sufficient, on their own, to sustain that new model. For this reason, a decision was taken to replace systems, and this was the reason behind the recent tender for a Core Loans and Bursaries Management System.

The information technology (IT) model of the new system would have ten aspects. They would be the interoperability layer (to which all the aspects would be connected), the Core Processing Front End (for servicing and closure of accounts, credit and risk management and student loans and bursaries), Business Process Management (for the acquisition process and business rules processing), Content Management (unstructured data), Financial Management (for finance procurement and asset management), Data Warehouse, Electronic Fund Transfer payments (EFT), Card Management Solution, Portal and Call Centres.

Mr Mackinnon-Little then outlined more details on the Centralised Applications Process, which was aimed at building and managing direct relationship between NSFAS and students. The system would be able to identify service needs of students, in relation to the available loans/bursaries and the processes involved. It would be able to handle student transaction requests, resolve student enquiries, handle account status change requests, manage loan recoveries, collect student repayments, maintain loan and bursary information, and do ‘batch and dispatch’ work. Student Relationship Management (SRM) would be the key focus of NSFAS’s relationship with students. There would also be an active communication strategy for all stakeholder groups. He reiterated that NSFAS would focus on school learners as early as Grade 9. However, this was a process, and there would be overlaps between departments and NSFAS, an they would have to collaborate effectively. In order that this system be efficient and effective, there must be alignment between the CAPs of NSFAS and the DHET, to achieve a seamless service to students. He also repeated that the system would introduce new student channels, including internet and cell phone. Applications could be made through a number of new centres, including schools, post offices, government service centres, regional offices and others. The CAP would be essential for managing direct NSFAS relationship with students and support the delivery model. The new financial aid model would continue to receive applications through FAOs at universities and colleges. By 2014, there would be more technology-based applications, giving students direct access through the internet and cell phones.

Mr Johnstone stated that the operational implications of the new model were that the existing systems needed to keep running while the new system was implemented, and these systems would have to run parallel with each other at the time of implementation, to ensure a smooth transition. There would be a need to manage the changes to staff, processes and systems, and to align individual roles and the new models. A skills audit of NSFAS staff was currently under way to assess the skills and competencies of the current staff and to identify who needed training, to enable those people to operate effectively and efficiently in the new system. Current jobs in the NSFAS would need to be restructured to support the new model. New staff would need to be employed in areas where the NSFAS need to grow capacity and capability. The NSFAS had developed over 150 offices to help in the implementation of the new model. The new requirements of the new model would be incorporated into the performance management framework, so that by the 2013/2014 financial year, staff performance would be assessed against their ability to operate in the system.

Mr Msulwa Daca, Chief Financial Officer, NSFAS, stated that the financial implications of the new model were that there would be accurate financial management of funds for the first time ever, and also accurate financial reporting because of the direct access that NSFAS would have to students. The new model would enable a full audit of funds and improved audit outcomes. There would be an increase in funds available for loans, due to increased recoveries. The new model would ensure that students would receive the full cost of study – covering tuition fees, residence, books, food and transport. However, universities and colleges would continue to receive tuition and residence fees directly from NSFAS.

In order to implement the new model, the NSFAS Board, in concurrence with the Ministers of DHET and DBE, had approved R98.2 million over the next two years. A break-down of how the amount would be spent showed that R4.82 million and R1.49 million would, respectively, be spent in 2012/13 and in 2013/14. 2 000 would be spent in 2012/13 and 2013/14 respectively on student centred model design. For infrastructure and implementation, the amount  of R69 288 000 would be spent in 2012, and R21 433 000 in 2013. R886 000 and R274 000 would be spent, in 2012 and 2013 respectively, for policies, procedures and training. The new model would require significant additional human resource capacity, particularly as funds for students increased. There would also be increased funding for student loans and bursaries required for eligible students.

Mr Themba Mosia, Board member, NSFAS, stated that in order to successfully implement the new model, there would have to be engagement with stakeholders such as the Portfolio Committee on Higher Education and Training (who had oversight functions over NSFAS), government institutions such as DHET, DBE and National Treasury, regulators such as National Credit Regulator and the Auditor-General, and third parties such as Department of Home Affairs (DHA), the South African Revenue Service (SARS) and others. Engagement with learners would take place at Grade 9 level, and with student organisations, universities and FET Colleges. There would also be internal engagement with staff in terms of skills development and training, and new staff would be recruited to increase capacity. There would also be engagement with the existing student borrowers and bursary recipients. Overall, there had to be all-encompassing engagement with all stakeholders to ensure the successful implementation, management and sustainability of the new model.

Mr Sogayise stated that the tender process for the new Loans and Bursaries Management System would be finalised in September 2012. Staff skills development, training and resourcing was already under way and would continue throughout the transition. The TSC would lead project governance and regular reporting to oversight structures. By 2013, the Loans and Bursaries Management System should be in place. A Central Applications Process pilot would be run for 2014 academic year. By 2013, there would be full roll out of CAP, aligned to the DHET CAP, for applications for admissions to institutions. By 2013, the financial accounting and reporting on the new system would also be in place. The new model should become fully operational in 2014.

Discussion
Mr S Makhubele (ANC) asked if the system could identify that where more than one account related to the same student.

Mr Johnstone stated that each student was identified by his identification number in the loan management system. All the loans and the year they were granted were reflected in a students’ profile during the recovery process and the system was able to identify that the accounts belong to one person.

Mr Makhubele said that it was one thing to talk about access to funding, and another thing to talk about fair access to funding, because this would have a bearing on the failure rate and dropout rate. He asked for comment.

Mr Makhubele wanted to know if the new model would be able to identify anomalies in the system, such as an account being active while a student was no longer active in the university or FET College.

Mr A Mpontshane (IFP) stated that in the past, recipients of funding were not able to register at the universities where they had been accepted because the money for the tuition had not been paid into those institutions’ accounts. He noted the new model’s objective of ‘the money follows the student’, and asked if this meant that a student whose funding was approved would be able to get a confirmatory letter from NSFAS, even if the money had not yet been paid into the institution’s account. He also asked what portion of the bursaries would be paid directly into the students accounts.

Mr Johnstone said the objective of the new model was to provide access to financial aid to those students who really needed financial aid. The system would be able to identify students who were given funding and those who were actually registered. The system would be able to ensure that students pre-qualified for financial aid, at the time of applying for admission, and that they would be able to receive funding before going to register at their chosen institutions. The NSFAS had also engaged with the universities already, and had agreed that they would register students with funding letters, even if the monies had not been received yet by the universities. It must be remembered that the universities should, in future, have access to the NSFAS system to check if the student had been granted financial aid.

Mr Shai Makgoba, Chief Director: University Financial Planning, DHET, stated that NSFAS made an upfront payment of up to 30% of every institution’s allocation and this could therefore serve as an incentive for institutions to register students if they were in possession of a letter confirming financial aid.

Mr Mpontshane asked for clarity on NSFAS’ objective of reducing the number of NSFAS students who either failed or dropped out, and wondered if the bursaries would not be withdrawn if a student failed in one year.

Mr Johnstone stated that it was the responsibility of institutions to provide academic support to students in order to reduce student drop-out rates. However, NSFAS would collaborate with institutions in this regard. The most critical period in a student’s academic life was the first semester of the first year, and one of the key reasons students dropped out during that period was because of the financial burden on them. The new system would take away this financial burden. NSFAS held statistics on the success rate of students on financial aid.

Mr Mpontshane asked how the NSFAS would expedite the issue of staff performance agreements in its staff performance assessment.

Mr Johnstone confirmed that NSFAS had a performance management system in place. Staff members had signed Performance Agreements. Staff performance appraisals took place on a quarterly basis. The NSFAS would ensure that the existing performance management system aligned with the new model.

Ms A Lotriet (DA) commended the presentation and stated that she hoped the new model would be operational by 2014. Ms Lotriet asked whether the money that would be paid to students as bursaries would now cover the full cost of the study.

Mr G Radebe (ANC) asked if there was going to be a limit to the amount of money a student could withdraw from his account, pointing out that if there was not, students could abuse the system and use the money for other purposes.

Mr Johnstone explained that the system would be designed in such a way that ‘buckets’ of accounts for various small purposes would be available to students, but there would be a limit to the amount that could be withdrawn from such ‘buckets’ at one time. This would ensure, for example, that a student would not use money that was being made available for accommodation money to pay for a taxi. The system was not aimed at controlling students, but at teaching them to manage their finances.

Ms Lotriet commented, in relation to the NSFAS’ intention to combine the new model with the CAP of universities, that the DHET had said that its CAP processes did not relate to admissions. She asked if this was also true of the NSFAS CAP process.

Mr C Moni (ANC) stated that the operational implication of the new model was that the changes would affect the existing staff, and asked if NSFAS had plans to ensure full integration of staff into the new system.

Mr Johnstone noted that NSFAS had consulted with its entire staff on the new model. The next phase would be to organise functional workshops for each unit in NSFAS on the new model.

Mr L Bosman (DA) stated that the costing and running cost of the transformation programme was not stated in the NSFAS presentation, and he asked if NSFAS was sure that the model it would run was the most cost-effective one.

Mr G Radebe (ANC) asked for an assurance that NSFAS would not, as it had in past, be concentrating only on the wealthier provinces, and would ensure that the provinces most in need of financial assistance would receive it.

Mr Radebe asked when the IT scope system was going to be implemented.

Mr Johnstone said that the plan was to run a pilot CAP in 2013 before it became fully operational in 2014.

Mr Radebe asked about other third parties with whom NSFAS intended to align, apart from DHA and SARS.

Mr Johnstone responded that there could be a number of third parties with whom the NSFAS would align in implementing the new model. At the moment, only the DHA and SRAS have been identified but other third parties would be identified in due course..

Ms N Gina (ANC) stated though although one million students have been covered in this year, the budget for the NSFAS had increased significantly, and she would have thought that more would be covered.

Ms Gina asked for clarity on what the NSFAS meant when it said that “beneficiaries were not being able to pay back loans”.

Mr Mayathula asked for clarity on why the NSFAS was finding it difficult to recover loans when it was aligned with SARS.

Mr Johnstone explained that students were not required to repay loans until after one year after graduating, and until they were employed and earning more than R30 000 a year. Then the ‘Affordability Rules’ would determine how much and how each student’s loan would be repaid. The problem with loan recovery in the existing system was that the NSFAS only started to create a relationship with a student only after graduation. The relationship with SARS was only operative in the sense that SARS would notify NSFAS once a particular student was employed and being paid. NSFAS needed to tighten up on the credit management system by reminding students of their responsibility to repay loans once they started earning money.

Ms Gina made a plea to students to take NSFAS funding seriously and work hard to graduate, in order not to lose such funding.

Mr S Mayathula asked whether the NSFAS was implying that students would no longer apply through their universities and FAOs for financial aid, after 2013.

Mr Mosia stated that applications for financial aid in 2013 would be done as they were at present, because of the time constraints to getting the new system running, so for that year, students would still be applying through institutions and FAOs. However, it was hoped that the NSFAS and all stakeholders would agree on a date for the full implementation of the new model in 2014, across the board.

Mr Mackinnon-Little expanded that the tender for the IT system went out in July 2012. The responses to the tender had been received and were being evaluated. The implementation of the system would start in October 2012, and run to September 2013.

Mr Mayathula asked if the R98.2 million that had being approved for the next two years formed part of the budget for 2012, or whether this was now an additional amount.

Ms Gina noted that the new model implied that more staff would be needed, and more students would be covered. She asked if NSFAS would be able to pay for what was planned, given the resources that it had at present.

Mr Johnstone said the R98.2 million had been approved by the NSFAS Board for the next two years, for the implementation of the Transformation Programme. It was not part of the R7.5 billion budget for the Scheme for the 2012 financial year.

Mr Daca added that R7.5 billion was the budget for student loans and bursaries for 2012. The R98.2 million related specifically to the next two years’ budget for implementation of the new model. R82.5 million was the NSFAS operating budget. The NSFAS was considering whether the current operating budget would be able to cover the operating cost of the new model and was liaising with the National Treasury, although it believed that it would probably be able to implement the new model with what it currently had available.

Mr Bhanga asked for clarity as to who would exclude students from the system.

Mr Johnstone said that it was the universities who excluded students. NSFAS would agree to provide financial aid for a period of years, and the student would enjoy that financial aid, as agreed, provided that he did not fail an academic year.

Mr Bhanga asked if NSFAS intended to place its officials in institutions to deal with the “walk-in” students who had been admitted, but did not yet have financial aid.

Mr Johnstone agreed that the system, as well as doing pre-approvals, could also cater for the walk-ins of those who really needed financial aid.

The meeting was adjourned.