ATC141024: Report of the Portfolio Committee on Higher Education and Training on its Oversight Visit to the National Student Financial Aid Offices (NSFAS) in Wynberg Dated, 22 October 2014

Report of the Portfolio Committee on Higher Education and Training on its Oversight Visit to the National Student Financial Aid Offices (NSFAS) in Wynberg Dated, 22 October 2014

The Portfolio Committee on Higher Education and Training, having conducted an oversight visit to the NSFAS Head Office in Wynberg on 17 September 2014, reports as follows:

1. Introduction

In line with its programme for the second term, the Portfolio Committee conducted an oversight visit to the NSFAS Head Office in Wynberg on 17 September 2014. This report provides a brief summary of the presentation made by NSFAS which focused on the student-centred model. Furthermore, the report includes the observations and recommendations made by the members.

2. Background and purpose

The National Student Financial Aid Scheme (NSFAS) was established in terms of the National Students Financial Act, No 56 of 1999 and was mandated to provide financial assistance in the form of loans and bursaries to eligible students enrolled in full-time study programmes at public higher education institutions and Technical and Vocational Education and Training (TVET) colleges. It was a conversion of the Tertiary Education Fund of South Africa (TEFSA), a section 21 no-for-profit company which was a public lender to historically disadvantaged students. The government conceptualised NSFAS as a loan and bursary scheme in order to address the rising student debt problem in higher education institutions (HEIs) and to give effect to the government's commitment to redressing the inequities of the past.

In June 2009, the Minister of Higher Education and Training appointed a Ministerial Committee to assess the strengths and shortcomings of NSFAS and to advise the Minister on the short, medium and long-term needs for student financial aid to promote the twin goals of equity of access and providing free undergraduate education to students from working class and poor communities who cannot afford further or higher education. The Review Committee’s findings were, among others; the NSFAS loan administration has being criticised as low, cumbersome and inefficient; lack of uniformity across institutions of higher learning and Technical and Vocational Education and Training colleges on the administration of the NSFAS function, leading to huge imbalances across institutions in how NSFAS is accessed and experienced by different students in different institutions; the processing of NSFAS loan applications and agreements by financial aid officers employed by and therefore accountable to institutions posed a serious challenge in the sense that NSFAS does not have a direct relationship with the students to whom it lends money and students do not have direct contact with the entity from which they borrow money until they have exited the system, this makes it difficult for NSFAS to recover loans and replenish the pool of funds, and that the returning students have to reapply for new loans every year which is unnecessary administrative burden.

The Review Committee recommended that NSFAS develops and implement a student centred model (SCM), an electronic loan system that will ensure that funding follows the student instead of the institution. The aim of the new system is to eliminate delays in the disbursements of funds to students and institutions and to prevent the use of fraudulent documents by ineligible students to access financial aid. The first pilot of the new SCM was implemented from January 2014 in 12 institutions (7 universities and 5 TVET colleges).

As part of its in-year monitoring, the Portfolio Committee resolved to visit the offices NSFAS to receive a briefing on the new SCM and to see how the model works.

3. Methodology

The Portfolio Committee received presentations from heads of different programmes of NSFAS followed by the discussions and responses. At the end of the briefing session, the Portfolio Committee conducted a tour of the NSFAS offices.

4. List of delegation

4.1 Portfolio Committee on Higher Education and Training

Present: Mr D Kekana (ANC) Whip, Ms J Kilian (ANC), Ms S Mchunu (ANC), Ms M Nkadimeng (ANC), Ms Y Phosa (ANC) Chairperson, Mr E Siwela (ANC), Prof B Bozzoli (DA) and Mr S Mbatha (EFF).

4.2 Parliamentary support staff

Mr A Kabingesi: Committee Secretary, Ms M Modiba: Content Advisor, Ms T Majone : Committee Assistant, Mr L Komle : Researcher and Ms N Magazi : Executive Secretary

4.3 National Student Financial Scheme

Mr Z Sogayise : Chairperson, Mr M Burger: Board Member, Mr M Daca : Chief Executive Officer, Ms X Peter: Chief Executive Officer, Mr L Nage : Chief Financial Officer, Mr R Mackinnon-Little: Technical Programme Manager, Mr X Mkungeki : Loans and Bursaries Process Specialist, Mr C Raphoto : General Manager Corporate Services, Ms M Mogorosi : Personal Assistant to the CEO and Ms I Madindi : Executive Assitant Stakeholder Engagement.

4.4 Department of Higher Education and Training

Dr D Parker: Acting Deputy Director-General University Education, Ms T Futshane : Chief Director Vocational and Continuing Education and Training, Ms P Whittle: Director, Ms C Khambako : Deputy Director Bursary Unit, Ms N Rasmeni : Parliamentary Liaison Officer (PLO) Ministry, Mr S Mlangeni: PLO Office of the Deputy Minister, Ms P Sekgobela : PLO Office of the Director-General and Ms B November: Intern.

4.5 Other guests:

Mr P Newman: Parliamentary Researcher Nehawu .

5. Summary of the presentation

5.1 Student centred-model

The Chief Executive Officer of NSFAS, Mr M Daca led the presentation and gave a brief background of NSFAS including its mandate in terms of the NSFAS Act (56 of 1999). He noted that in 2014, NSFAS will spend R9 ,2 billion to assist 450 000 students at 25 public universities and 50 Technical and Vocational Education and Training (TVET) colleges on 320 campuses in 9 provinces in South Africa. In outlining student financial aid in context, he noted that NSFAS is the biggest funder in the market for funding post-school education and, the total funds for loans and bursaries for the 2014 academic year is R9 ,2 billion. In comparison, commercial banks and education credit companies provide R3 ,3 billion a year. Concerning the growth of the entity, he alluded that NSFAS has disbursed more than R41 ,5 billion in loans and bursaries to over 1,4 million students and, there has been exponential growth in funds for student financial aid from R441 million in 1999 to R9,2 billion in 2014. The CEO made a comparison of NSFAS loans with loans offered by commercial banks. The interest charged by loans from commercial banks is 10 ,25 % as compared to 4,4% charged by NSFAS. He emphasised that despite the growth in funds, NSFAS is unable to assist all needy students.

In relation to the fundraising framework of NSFAS, Mr L Nage : Chief Financial Officer noted that the strategic objectives of NSFAS is to raise new funding for undergraduate study and to maximise recovery of outstanding loans from all eligible debtors employed. He further alluded to the fact that NSFAS is in the process of identifying new funders in the public and private sector for students currently eligible in terms of the NSFAS means test and students currently not eligible in terms of the NSFAS means test “the missing middle”. Furthermore, the CFO noted that engagements with the Public Investment Corporation (PIC) were underway on models for a missing middle funding instrument.

Mr R Mackinnon-Little: Technical Programme Manager of NSFAS provided a brief background of the student-centred model. He noted that the previous model was deeply flawed and applications through Financial Aid Offices (FAOs) were not controlled by NSFAS. He highlighted the fact that NSFAS has never had a direct relationship with students with the old model and, this made it difficult to recover loans.

The benefits of the student-centred model were summarised as follows:

· Automated means test, checked against government databases;

· Standardised process and no loan agreement forms;

· Alignment with admissions and registrations processes;

· Fraud detection and prevention;

· Improved governance through new systems;

· Funding reaches intended beneficiaries;

· Students know funding status before registration and they apply once for a course of study;

· Students allowances are paid within 48 hours of signing a loan agreement; and

· Ability to raise and manage additional funds for student financial aid.

The challenges of the student-centred model were summarised follows:

· High dependency on accurate student and institutional data;

· Dates where data or action is required, particularly for funder selected bursary student, need to be aligned to academic calendar;

· Inadequate process to facilitate walk-ins and late registrations at TVET colleges;

· Insufficient funds at the beginning of the academic year and students are funded through the loan recoveries, and

· Funders like Funza Lushaka delay to confirm the number of students to be funded.

Concerning the organisational structure and capacity, the increase in personnel staff was 106% (145 positions in 2012 – 299 positions in 2014). The significant growth in the number of position emanated from the demand for human resource capacity to manage the new system.

6. Office tour

The Portfolio Committee was informed during the office tour that the present NSFAS premises were leased since the old premises did not have adequate space to accommodate the growth in human resource. The tour of the premises included a visit to; human resource unit, call centre, documentation unit, communications unit and information technology unit. The premises were found to be conducive for working and had sufficient space to accommodate the current staff complement. The Committee Members also saw data capturers processing loan agreements of students which raised a concern regarding delays in the transfer of funds to students and institutions.

7. Observations

The following formed part of the key observations:

7.1 Human Resource Management

The Portfolio Committee was concerned with the significant growth of human resource capacity as the core mandate of NSFAS is to distribute loans and bursaries to students. The total staff complement in 2014 is 299 staff as compared to 145 in 2012.

7.2 Loan administration

The Portfolio Committee expressed its concern with the late payment of claims submitted by higher education and training institutions to NSFAS as this impact negatively on both students and institutions.

7.3 Loan recovery

It emerged that NSFAS is owed more than R2 billion by its eligible debtors and the loan recovery systems implemented by the entity are slow and ineffective. The Portfolio Committee noted that NSFAS has a serious budget shortfall and more emphasis should be placed on recovering debts owed by former student to supplement the budget shortfall.

7.4 Student-centred model

The Portfolio Committee commended the efforts put by NSFAS in developing the new model aimed at improving the management and distribution of student loans and bursaries to needy students. Nonetheless, members were concerned that most of the challenges highlighted by NSFAS with the new model were not coming from students. Furthermore, it was noted that students from rural areas particularly those coming from no-fee schools will find it challenging to make use of the new model using sophisticated technology through mobile phones.

7.5 Budget

Despite the increase in funding from R440 million in 1999 to R9 billion in 2014, the demand for financial aid exceeds the current supply. The Portfolio Committee is concerned that 50% of eligible students were unfunded by NSFAS owing to inadequate budget. The increase in student protests across higher education institutions even where the new model is piloted was highlighted as a major threat to stability in higher education. Furthermore, the new model does not make provision for top slicing and this infuriated some needy students as they are not funded for the 2014 academic year particularly in institutions where the new model is piloted.

8. Summary

The visit by the Portfolio Committee took place after the Minister recently visited the new NSFAS Head Office and, the purpose of the visit was mainly to assess the strengths and shortcomings of the student-centred model which is being piloted at seven higher education institution and five TVET colleges. The implementation of the student-centred model emanated from the recommendations by the Ministerial Committee on Review of NSFAS Report and, NSFAS informed the Portfolio Committee that 80% of the recommendations in this report were implemented.

The student-centred model was launched to deal with longstanding inefficiencies in the awarding and administration of loans and bursaries by NSFAS. Under the old model, financial needy students intending to study at any public higher education institution or TVET college have to apply for financial aid at the institution they wish to attend. These institutions make the decision about awarding of loans and bursaries to students that pass the means test. The awarding of loans and bursaries by universities and TVET colleges has been overwhelmed with many problems over the years such as poor administration and inability by these institutions to conform to government policies. Under the old model, some institutions demanded poor students to pay upfront fees before they can be registered and students had to reapply for funding annually though they have passed the means test. The old model will be phased out in the next four years.

Government allocated R98 million to NSFAS to roll out the new student-centred model at seven universities and five TVET colleges across the country, excluding human resource required for the new system. The new system will make provision for students to apply online directly to NSFAS and those who have no access to internet will submit an application form that will be made available at Post Offices all over the country. The main advantage of the new model is that NSFAS will have a relationship with the student which will make it easier to recover the loan after the student has graduated. Furthermore, NSFAS will pay allowances for food, books, transport and accommodation directly to students through the sBux voucher system. Students will use their mobile phones to access their accounts and pay the procured service providers without spending their airtime. The sBux voucher system will prevent fraud and corruption by students by ensuring that funds are used for the purpose intended for.

Despite the new effective measures introduced by the new model, it has some shortcomings that need to be addressed before the full roll out is implemented by 2020. The current budget shortfall of NSFAS will result in many students not being funded since the new model has no provision for top slicing like the old model. The high dependency on accurate student and institutional data is a serious challenge for some universities and TVET colleges who do not have adequate information technology capacity. The reliance of the new model on mobile phones for students to access and pay their accounts may be a disadvantage especially for students coming from disadvantaged backgrounds. Inadequate network coverage in remote rural areas might impact negatively on students who want to access their accounts.

9. Recommendations

The Portfolio Committee having considered the student-centred model of NSFAS; recommends the following:

9.1 Budget

NSFAS should engage on a robust fund raising framework particularly with the private sector to increase its sources of funding and to raise more funding for undergraduate programmes. The department should explore the possibility of providing additional funding to cover the current budget shortfall of NSFAS before the new model is fully implemented in all public higher education and training institutions.

9.2 Loan recovery

The current value of the NSFAS loan book is very high and a comprehensive loan recovery strategy should be explored to maximise recovery of outstanding loans from eligible debtors employed in both the private and public sector.

9.3 Student-centred model

The current shortcomings of the new model should be addressed by NSFAS as a matter of urgency before the old model is phased out within the next four years. Furthermore, more emphasis should be placed on improving the administration of the new model than employing more staff personnel. The new model should be linked with the Central Application Service (CAS) of the department so that the application process to higher education and training institutions is effective and efficient.

9.4 Loan administration

The Portfolio Committee strongly recommends for the processing of outstanding claims submitted by higher education and training institutions to NSFAS before the end of the academic year to prevent recurrence of student protests.

9.5 Bursary administration

Consultations with funding partners particularly the Department of Basic Education’s Funza Lushaka Bursary should be made so that the selection process of students is completed earlier in the academic year so that students can be assisted effectively.

9.6 Communication strategy

The Portfolio Committee recommends that NSFAS be clearly visible and accessible to the public in particular the head office. A massive advocacy campaign for the student-centred model should be rolled out to inform learners particularly from rural areas of the existence of this model.

Report to be considered.