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Higher Education Student Funding

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TOTAL HEAD COUNT ENROLMENTS: 2000-2003

Graphs 1-3 summarise total head count enrolments in the sector. Some key points to note are these:

• Increases in 2003 compared to 2000:

Total enrolments: +21%African enrolments: +23%White enrolments: +11%Female enrolments: +22%

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GRAPH 1

Head count enrolments by sector (thousands)

0

200

400

600

800

2000 385 202 587

2001 427 223 650

2002 460 215 675

2003 481 229 710

Public universities Public technikons Total

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GRAPH 2

Head count enrolments in public universities and technikons by race group (thousands)

0

200

400

600

800

2000 348 31 40 168 587

2001 393 34 44 179 650

2002 403 39 49 184 675

2003 428 43 52 187 710

African Coloured Indian White Total

Note: Average annual growth rates 2000-2003: African students: 7.1%, (b) coloured students: 11.8%, (c) Indian students: 9.1%, (d) white students: 1.8%

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GRAPH 3

Increases in head count enrolments in universities and technikons by race group: 2003 compared to 2000

(thousands)

0

20

40

60

80

100

120

140

Series1 80 12 12 19 123

African Coloured Indian White Total

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GRAPH 4

Distribution by race group of head count enrolment in universities and teachnikons: 2003

60%

6%

7%

27%

African

Coloured

Indian

White

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.

Public university + technikon head count enrolments as % of SA population in 20-24 age group

0%

5%

10%

15%

20%

25%

Gross participation rate 15% 18% 20%

National Plan: 2000 estimate

Latest 2003 estimateNational Plan:

projection for 2010 to 2015

GRAPH 5

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TEACHING INPUT UNITS AND BLOCK GRANT ALLOCATIONS

The table below gives the block grant totals in the HE budget for the funding periods 2002/03 to 2006/07. It also shows what the annual increases were in nominal Rands in these totals.

(RANDS MILLIONS)

Rands millions

Increase compared to previous year

2002/3 7248 6.0%2003/4 7929 9.3%2004/5 8568 8.3%2005/6 9144 6.7%2006/07 9716 6.3%

BLOCK GRANT ALLOCATIONS

Graph 9 compares the increases that occurred in the teaching input unit total with increases in block grants in nominal and real Rands. Graph 10 shows what the effects of rapid growth were on the nominal and real Rand values of a teaching input unit.

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GRAPH 6

Comparison of changes in block grant allocations and teaching input units on base of 2002 = 100

0

20

40

60

80

100

120

140

2002/3 100 100 100

2003/4 109 102 108

2004/5 118 105 114

2005/6 unadjusted 126 107 125

Block grants in nominal Rands

Block grants in real Rands

Teaching input units

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GRAPH 7

Teaching grants per teaching input unit

0

1000

2000

3000

4000

5000

6000

7000

2002/3 6200 6200

2003/4 6300 5900

2004/5 6450 5650

2005/6 unadjusted 6250 5250

Nominal Rands Real Rands

Note: the teaching component = 65% of block grant total. Total above wasderived by dividing teaching component by teaching unit totals.

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Total funds are available to the NSFAS

Total Income by Source

(Rands Millions)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Department of Education 10,3 57,1 283,8 197,7 296,5 390 444 450 500 545 578 864

Department of Labour 0 0 0 0 0 0 0 0 22 106 73 16.9

Department of Agriculture 0 0 0 0 0 0 0 0 0 0 5.3 5.7

Provincial Governments 0 0 0 0 0 0 0 0 14 15 21 22.6

Total from State Sources 10,3 57,1 283,8 197,7 296,5 390 444 450 536 666 677 909.2

Funds repaid by recipients 0 0 0 0 0 14.2 24 175 187 195 263 280

SA Private Sector + NGO's 0 0 0 0 0 5 5 6 1 7 5.5 6.5

Overseas Donors 60,1 97,2 49,6 153,3 98,0 20 35 22 20 10 2.2 2.4

Total Income 90,4 154,3 333,4 351,0 394,5 429.2 508 653 744 878 948 1198 estimates

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Allocation to Higher Education Institutions 

The approved formula is based on two indices:  

(i) The disadvantaged student index (DSI), which is calculated for each institution using full-time equivalent (FTE) enrolled undergraduate students, disaggregated and differentially weighted by race, namely, African = 3, coloured = 2, Indian = 1, and white = 0. The rationale is that while all black students are disadvantaged, the degree of disadvantage varies. Although not weighted, white students are eligible for NSFAS funds.

(ii)(ii) The full cost of study index (FCS), which is calculated for each institution based on the costs required to cover tuition and residence fees, including notional amounts for travel and books.

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The allocation of NSFAS funds to different institutions between 1999 and 2003 shows that there was a significant redistribution of funds to the historically white institutions, whose share of the NSFAS allocations increased from 41% to 50%, i.e. by 9% between 1999 and 2003. The corresponding decrease in the historically black institutions was in the historically black universities. The historically black technikons share remained constant.

Reason for the shift: changes in student enrolment patterns, in particular, African and coloured student enrolments in the historically white institutions grew by a larger proportion than in the historically black institution, which is illustrated in the graph. The changes in these enrolment shares mirror the changes in total NSFAS allocations by institutional category.

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Distribution of NSFAS allocations by institution category: 1999-2003

0%

10%

20%

30%

40%

1999 36% 18% 20% 21% 5%

2000 33% 18% 22% 22% 4%

2001 32% 17% 22% 24% 5%

2002 29% 18% 24% 26% 4%

2003 27% 18% 27% 23% 5%

HBU HBT HWU HWT Distance

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Allocations to Students

 

The NSFAS board sets each year the parameters within which awards can be made by institutions to individual students. These include the following:

 

     a national means test, including the expected level of family contribution;

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•   the minimum (R2 000 in 2004) and maximum (R30 000 in 2004) sizes of awards – the size of the award is determined by the full cost of study minus the expected family contribution and minus any other bursaries obtained by the student;

 

•   the proportion of an award which can be converted to a bursary on account of good academic performance – this has been pegged at 40% since the inception of the NSFAS;

 

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• the interest to be charged on loans (7% in 2004), which is calculated at 2% above the annual rate of inflation.

 

•  the conditions under which awards can be renewed in subsequent academic years;

 

•  the income level after graduation at which the loan repayment kicks in – this was set at an annual salary of R26 300 in 2001.

 

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Number of Awards Allocated

The total number of awards made to students between 1999 and 2002 is summarised in the Table 5 below. The table shows that the total of students receiving NSFAS awards increased from 69 900 in 1999 to 86 200 in 2002, i.e. by 16 300 (or 23%).

 

Head Count Totals of Students with NSFAS Awards

1999 2000 2001 2002 2003 2004

Historically Black Universities 23662 23698 23705 28696 27823

Historically Black Technikons 15778 16609 17777 19320 25102

Subtotal for Historically Black Institutions 39440 40307 41482 48016 52925

Historically White Universities 8904 10446 12848 14733 17709

Historically White Technikons 14936 15564 18387 19876 17471

Subtotal for Historically White Institutions 23840 26010 31235 34609 35180

Subtotal for Distance Institutions 6647 5766 7871 7565 8500

Total Awards 69927 72083 80588 90190 96605 100000 estimate

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The ratio between NSFAS awards to students and the total African and coloured student enrolments in contact programmes, that is, the extent to which NSFAS awards are reaching needy students is illustrated in the graph below. This reflects the changes in enrolment patterns between different institutional categories discussed above.

Ratio of NSFAS awards to head count totals of African + coloured students in contact programmes

0%

10%

20%

30%

40%

50%

1999 34% 37% 18% 27% 29%

2000 38% 39% 20% 27% 31%

2001 36% 38% 23% 27% 31%

2002 34% 38% 23% 27% 30%

HBU HBT HWU HWT Contact average

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The Means Test

 

In 2003 a compulsory standardised means test was introduced to assess eligibility. Prior to this institutions were allowed to develop and use their own mean tests to assess eligibility.

 

The purpose of the standardised means test is:

 

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  to identify the poorest students at an institution;

 to calculate how much the student’s family should be expected to contribute towards her/his studies;

 to determine the monetary value of the NSFAS award to individual students.

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Size and Coverage of the Loan

 

Key issue: the impact of the practice of not providing students with the maximum loan. This is done to ensure that all eligible students obtain some financial assistance as the institutional NSFAS allocations are not adequate to cover the full needs of all eligible students.

 

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Full Cost of Study (FCS) and NSFAS Award Sizes by Institution, 2004

Institution FCS (rand) NSFAS Award Size (average rand)

Medunsa R 40,024 R 22,205

University of Cape Town R 49,780 R 17,890

University of Port Elizabeth R 30,250 R 9,736

University of Kwazulu Natal R 31,930 R 16,108

University of Pretoria R 32,942 R 13,759

University of the North West R 23,525 R 8,409

University of Fort Hare R 18,675 R 9,445

Eastern Cape Technikon R 23,917 R 5,571

Penninsula Technikon R 25,543 R 8,119

University of the Western Cape R 27,525 R 11,273

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The impact of this practice is clear – it precludes students from completing their studies unless they or the instituition’s can make up the difference. The drop-out rate is on average 40%. It is not possible, as a result of poor data, to distinguish between students who drop-out because of financial reasons and those who fail. An investigation undertaken by the NSFAS suggests that financial constraints were the main reason for students dropping-out.

The gap between the average NSFAS awards and the average full costs of study is indicative of inefficiencies. Two options could be considered:

 

 the number of students awarded NSFAS loans should be reduced to ensure that all awardees obtain the maximum loan possible.

  Injection of additional funds to reduce the gap.

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Loan: Bursary Balance

 

The NSFAS is based on the principle that a proportion of the annual loan should be converted to a bursary as an incentive to enhance academic performance - 40% of the annual loan could be converted to a bursary based on academic performance, i.e. the passing of all the subjects for which a student is registered.

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The impact of changing the ratio on an individual student who registered in 2000 and graduated in 2003 (based on average award of R7090 and R 9255 respectively) is the following :

 

      on the current 60:40 ratio, the loan repayment on graduation is R 24 112;

      55:45 = R 22 102;

      50:50 = R 20 093;

      45:55 = R18 084;

      40:60 = R 16 074.

 

The difference for the individual between the current ratio and a 40:60 ratio is R8 038.

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The impact of changing the ratio on the NSFAS based on the actual bursary written is as follows:

 

      55:45 ratio = an additional R 189 million written off;

      50:50 ratio = R 240 million written off;

      45:55 ratio would result in an additional R 360 million written

off;

      40:60 ratio would result in an additional R 481 million written off .

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Changing Interest Rates 

The loan portion of the NSFAS, like all loans, has to be repaid with interest. However, unlike commercial banks, which peg their interest rate to the prime rate, i.e. the rate at which the commercial banks borrow money, the NSFAS interest rate is equal to the rate of inflation plus 2%. This is informed by two factors:

(i) link to the inflation rate ensures that the value of the loan is maintained over the period of repayment, thus enabling the re-injection of recovered funds to assist future students.

(ii) additional 2% on the inflation rate promotes the long-term sustainability of the NSFAS through contributing to administration costs and the shortfalls that result from non-payment due to illness, death and unemployment.

 

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The impact of not charging interest or, alternatively, not charging the additional 2%, on an individual student who registered in 2000 and graduated in 2003 is the following:

 

      on the current interest charges, the loan repayment on

graduation is R 24 112;

      it would be R 23 030 if the additional 2% was not charged;

      it would be R 19 646 if no interest is charged at all.

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The difference between the current interest charges and no interest charged is therefore R 4 466.

 

The impact of not changing interest or, alternatively, not charging the additional 2%, on the NSFAS is the following:

 

      it would lose R 44 million if the additional 2% was not charged;

      it would lose R 180 million if no interest was charged at all.

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There is no evidence that the existing framework imposes an undue burden on students. The scale and successful recovery of loans suggests the contrary. Currently about 45% of loans are recovered = about R 210 million p.a.

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The Allocation Formula

 

The formula is based on a combination of two indices, the disadvantaged student index (DSI), which determines the volume of need, with “black students” serving as a proxy for need and the full cost of study index (FCS), which determines the funds required to cover the cost of study.

 

However, both these indices contain significant anomalies, which impact on the allocation of funds to higher education institutions and require review and revision.

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The DSI has two anomalies:

 

 previously the definition of black student included non-South Africans, which distorted the allocation formula in favour institutions with large enrolments of non-South African students. This has been changed from this year and is no longer an issue.

 

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  the use of “black students” as a proxy for need assumes that all black students, irrespective of socio-economic status are needy. However, the socio-economic status of black students varies considerably across institutions. For example, at UCT 45% of black students are eligible for a maximum loan, while at Fort Hare it is 85%. Thus a black student at UCT should not be counted in the same way as a black student at Fort Hare.

The FCS indices further distort the allocation formula in favour of the historically white institutions as the costs of study there are higher than in historically black institutions.

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Changing the Allocation Formula

 

In the short-to-medium term it would not be possible to revise the formula as:

 

  better proxy for defining need has to be developed;

  it is likely to result in a fairly significant redistribution of resources between different institutions, which if not managed could undermine not only the sustainability of the higher education system but also the policy goal of ensuring that access of the poor to all institutions is widened and improved.

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In the short-term, the Department is considering options that would remove some of the obvious anomalies, which would result in some redistribution of resources between different institutions but not be on a scale, which would threaten their sustainability.

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The Time Lag between Registration and the NSFAS Allocation

 

The time lag between the start of the academic year and the release of the first tranche of the NSFAS allocation to institutions at the beginning of the fiscal year, which is 1 April, has had an adverse impact on the ability of students to register and meet their financial obligations to the registering institution.

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This is due to the fact that students are expected to provide an upfront registration fee. The reason for this is many institutions experience severe cash-flow problems in the first quarter of the academic year.

 

The cash-flow problem has been addressed. From this year the NSFAS is providing institutions with advance allocations to alleviate the registration bottleneck.

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A further problem is that many institutions are unable to plan their annual intake and assess the demand on their NSFAS allocation until well into the first few weeks of the academic year because of the phenomenon of “walk-in” students. This refers to students who do not apply in the preceding year and turn-up on registration week.

Higher education institutions need to develop recruitment and planning processes that would enable the institution to make placement offers, including NSFAS allocations, to students well in advance of the registration process. Consider initiating a campaign to inform and educate potential students and their families about the importance of applying for admission and financial aid, including responding to offers in a timely manner in line with institutional deadlines.

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Student Fees and Mergers

In the case of pipeline students institutions have kept the pre-existing fee structures, except for effecting normal (inflation adjusted) annual increments.

In the case of new students two approaches have been adopted in the equalization of fee structures:

• Fee structures have been equalized with the institution subsidising students through a fee discount or additional financial aid.

• Equalization is being phased-in over a period of time to offset the difficulties that would result from an immediate move to equal structures.

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National Plan Enrolment Targets Humanities / SET / Business and Commerce = 40 : 30: 30 NSFAS Enrolments = 35 : 35 : 30

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