Fees Commission recommendations could create student loan crisis, warn experts

Far from offering free higher education, President Jacob Zuma’s report of the Commission on the Feasibility of Fee-Free Higher Education and Training in South Africa might actually harm disadvantaged students, creating a student loan debt crisis similar to that of the US and the UK, according to experts.

The much anticipated report has been met with resounding disappointment by political parties, student organisations and activists.

One of the issues raised was the recommendation that an income contingent loan (ICL) be established, through public/private partnerships, with financial institutions, all of which will be underwritten by government.

Economist at the University of Johannesburg Dr Sean Muller explained that this would mean either the student would pay the cost of higher education funding from their future income, or the government would have to pay.

“The proposal appears to be that government would ‘guarantee’ these loans by private banks,” he said.

The report was released as the Studied in Poverty and Inequality Institute (SPII) released a report yesterday on their recent probe into the realisation of decent work in South Africa.

It found only 14% of South Africans had a postschool qualification and South Africa had experienced a 157% increase in unemployed people with a tertiary qualification since 2008.

“Employment prospects of graduates are not as bad as is sometimes made out,” said Muller, “but what matters is not just whether graduates get employment but how much they earn.

“On the student side, whether the scheme leads to the crushing debt burden experienced in other countries will depend on the final terms of repayment and how reasonable these are.

“On the government side, if graduates’ employment prospects turn out to be poor, the country could find itself obliged to cover these costs: precisely the situation that the report acknowledges is not feasible.

“Closer examination of the specific loan requirements and graduates’ future job prospects would be required to determine possible consequences. But, either way, there is no free lunch.”

One of the faces of last year’s #FeesMustFall movement at Wits University, former SRC president Shaeera Kalla, said for students the recommendations in the report were devastating.

“I think it’s an atrocious idea to propose a system that ignores the realities of black tax and the historically unequal system of black people being at the bottom of the food chain. These recommendations are devoid of any reason or collective sympathies for the unfortunate realities of an unequal country,” she said.

The commission also recommended that government fund Technical and Vocational Education and Training (TVET) to the tune of a R50-billion cash injection, the funds for which would be diverted from surplus from the Unemployed Insurance Fund (UIF). Last year, City Press reported that the UIF had R99 billion in the bank. Muller said that this might not work.

“The commission’s proposals relating to the UIF may be well-intentioned, but they also appear to be deeply misguided. The UIF operates on the basis of a public finance principle known as ‘ring fencing’ … raising revenue using particular instruments that may only be used for a specific purpose.” – simnikiweh@citizen.co.za

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