National Student Financial Aid Scheme (NSFAS)
More than R24bn is owed to the National Student Financial Aid Scheme (NSFAS) by past and current students.
Nsfas has been the central funder for needy university students in SA. It was established under the Nsfas Act (Act 56 of 1999), and amended to allocate student financial aid funds to the 25 public universities and 50 technical and vocational education and training (TVET) colleges, and to administer loans and bursaries to students at these public institutions. The act also mandates the entity to recover student loans and to raise funds for student loans and bursaries.
This comes as students across the country have been protesting against paying fees, demanding the government find the money for free education.
According to the Nsfas annual report for 2015-16, the entity recorded a loan book with a cumulative nominal value of R24.2bn and a fair value of R7.2bn. During this same period, the entity had to impair an amount of R22m that was owed by institutions. The report stated that this money had been outstanding for more than three years with a slim probability of recovery.
National Nsfas spokesperson Kagisho Mamabolo said the R24.2bn represented two type of loans: ones that were due from graduates, and those loans that were not due as the students were still studying. "Furthermore, you should note that some of the loans are yet to be converted into a when students graduate," he said.
After graduation, debtors are given a 12-month interest-free period. Once the student is employed and earning R30,000 per year, he/she is expected to start repaying the study loan. "The interest rate of the student loan is calculated at 80% of repo, which is adjusted once a year. Deductions are calculated between 3% and 8% of income per annum," said Mamabolo.
The culture of nonrepayment by past students has not made it easy for debt collection, but since the launch of the Nsfas repayment campaign in October 2015, at least R338m has been collected. Mamabolo said more than 25,000 graduates had stepped up to settle their outstanding loans for the first time — a move that Nsfas described as "inspiring". A cohort of 38 beneficiaries who made settlements on their outstanding loans, contributed more than R2m alone.
So far, 233,470 applications have been received for funding to attend public universities and TVET colleges in 2017. Due to a high volume of applications, Nsfas executive management decided to open a second, and last, window for application for financial aid.
Applications for students who wish to study at TVET colleges will open on January 9 and close on February 14, and applications for students who wish to study at universities will open on January 9 and close on January 20.
Mamabolo said Nsfas enrolment figures were aligned with the enrolment figures of the institutions; exact figures would become available in January. "I can estimate that it will be more than 450,000 students to be funded," he said.
How to repay loans
The Nsfas repayments of student loans are governed by the National Credit Act and no longer by means of the "garnishee order" type method. Nsfas has made various repayment options available to suit the debtor.
Repayment methods include salary deductions, direct deposits, debit orders and employer buybacks. Salary deductions can be effected if graduates are employed (PAYE deductions) or self-employed in the private or public sector. This was in addition to the account maintenance and communication that Nsfas provides to customers on repayment through the contact centre and two debt collection companies.
Africa Direct Life, a registered Financial Service Provider and the ARA Group are contracted to Nsfas to assist in contacting Nsfas beneficiaries to start making repayments on their Nsfas loans. Mamabolo said this partnership would result in debt-collecting companies applying collections and revenue management experience to successfully enable beneficiary repayment, and with that, a "pay it forward" strategy.
Collection Is Quite Difficult
A debt-collections manager in Johannesburg said debt collection with people in this demographic was quite difficult as most graduates had entry-level jobs, which did not pay much, while others were the only breadwinners.
Debt collectors are connected to the credit bureau and can find information on anyone who has complied with RICA via their sim card, or can use an identity number to trace the person’s whereabouts. Collectors usually contact debtors via sms, telephone or e-mail. They charge anything between R2, 50-R18 for every time they make contact with the debtor, and a further capped consultation fee.
In his 2016 budget speech, Higher Education and Training Minister Blade Nzimande said the department had reprioritised more than R5.7bn over the 2016-17 to 2018-19 medium-term expenditure framework period to universities, to ensure that the fee freeze in 2016 did not lead to unmanageable fee increases in the future.
Another R4.57bn was allocated to Nsfas in 2016-17, where R2.54bn would be used to ensure 71,753 students who were not, or insufficiently, funded between 2013 and 2015 could pay their debts, and R2.03bn would ensure that these students and poor students entering universities for the first time could study. This amounted to a 47.3% increase in baseline funding for Nsfas in 2016.
Nsfas receives income for loans and bursaries from the Department of Higher Education and Training, the Department of Basic Education, National Skills Fund, other government departments, universities, Sector Education and Training Authority (Seta) funds and deferred income recognised.
Thanks To: Business Day
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