Here’s what you need to know about the new proposal for student loans

23 November 2022 - 12:00
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Higher education minister Blade Nzimande announced that NSFAS will receive R49bn for the current financial year.
Higher education minister Blade Nzimande announced that NSFAS will receive R49bn for the current financial year.
Image: Jairus Mmutle/GCIS

Private banks could soon offer a loan scheme to help students fund their higher education studies.

This week the higher education department revealed there have been discussions with private banks regarding the possibility of a loan scheme supported by government guarantees to assist students to fund their studies. 

The department was responding to a written parliamentary Q&A where the EFF asked whether the private sector, particularly private banks, could be approached to provide loans to “missing middle” students for their studies.

The EFF asked whether there has been a feasibility study on the impact of loans as a method to fund students, and if the loans will create the huge debt traps experienced in other countries.   

Who are ‘missing middle’ students?

“Missing middle” refers to those students who come from working-class households and do not qualify for the National Student Finance Aid Scheme (NSFAS) and cannot afford higher education.

NSFAS funding requires students to have an annual household income of R350,000 or less. 

Loan scheme supported by government guarantees

The department said it has not entered into agreements with the banking sector to provide loans to missing middle students. 

“However, there have been engagements with banks about the possibility of a loan scheme supported by government guarantees,” it said. 

Feasibility of loans explored

Issues relating to the feasibility of loans were explored in earlier work conducted by the department, particularly by a ministerial task team that reported in 2016.

“The findings of this work were incorporated into the report of the ministerial task team, whose recommendations are under discussion. The work of this ministerial task team reviewed previous policy advice provided to government,” said the department.

“In addition, the report reflected on the findings of the Heher judicial commission on the funding of higher education, which included recommendations for an income-contingent loan model and the tax-collection authority.

“In investigating a possible future loan model, the department will be mindful of the student debt situation and the feasibility of collecting loans.”

R49bn to help poor and missing-middle students  

Delivering his budget in the National Assembly in May, higher education minister Blade Nzimande announced the NSFAS will receive R49bn for the current financial year.

While the department historically grappled with increased demand for financial support from disadvantaged students, Nzimande expressed concern about what the growth trajectory of post-school education and training.  

“Government remains firmly committed to financially support students from poor and working-class backgrounds, while also putting a sustainable mechanism in place to support students from the ‘missing middle’ and postgraduate students.”

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