South Africa: South Africa’s National Student Financial Aid Scheme Has Helped Millions but Is in Trouble

The board of South Africa’s National Student Financial Aid Scheme (NSFAS) has been dissolved by the country’s higher education and training minister, Blade Nzimande, and the organisation placed under administration. Nzimande made the decision because of “(the problem of) non-payment of (students’) allowances”.

Thandi Lewin is a higher education scholar who worked in the Department of Higher Education with responsibility for oversight of NSFAS between 2018 and 2023. She also briefly served as a departmental representative on the NSFAS board in 2018. The Conversation Africa asked her to explain the organisation’s history, its mandate and the current crisis.

What is NSFAS and how many students does it fund each year?

NSFAS is a South African state entity established in 1999 under the auspices of the Department of Higher Education and Training. Its core function is to distribute government financial aid to students in public post-school education and training institutions – that is, universities and technical and vocational education and training (TVET) colleges.

Since its establishment, according to the minister, the scheme has supported more than 5 million beneficiaries. In 2021 it funded 826,084 students, 67% at universities and 33% at TVET colleges. (This number includes a small proportion of students who are funded through other state bursary schemes.)

About 61% of undergraduate students in public universities are funded through NSFAS.

How are students evaluated for funding?

Firstly, students must meet the financial eligibility criteria, with a family income of no more than R350,000 (about US$19,000) a year. Beneficiaries of the South African Social Security Agency automatically qualify for NSFAS support.

Secondly, students must be registered for a funded programme at a public TVET college or university. Continued funding relies on them meeting both NSFAS’s financial criteria and academic standards set by individual institutions.

NSFAS assesses funding eligibility using data supplied by applicants. The Department of Home Affairs and the South African Revenue Service verify the information. Academic admissions are determined by institutions.

It is important to understand the dual qualification criteria because it shows that the financial aid scheme operates within a higher education ecosystem. Collaboration between institutions is key for it to work effectively.

Is NSFAS in a stable condition?

The provision of state financial aid to students has been one of the most important and successful higher education policies in post-apartheid South Africa. Significant numbers of students who would otherwise not access higher education have been able to do so.

This can be seen in the sustained transformation of the demographic profiles of public universities.

Studies conducted by the Department of Higher Education show that university students funded by NSFAS are less likely to drop out than those who are not. For instance, data on the 2013 entering cohort shows that NSFAS students drop out at a rate 10 percentage points less than the overall undergraduate cohort. They also have an 8 percentage point higher throughput rate overall; this is a measure of student qualification completion.

Of course, multiple factors affect student success. But financial aid is critical to ensure equitable access to higher education and training.

What are its three biggest challenges?

Severe administrative challenges continue to weaken the effectiveness of this social justice policy. In short, the biggest challenges are:

• systems and capacity that are not fit for purpose
• administrative changes that do not recognise the complexity of the operational ecosystem and the need for co-operation and trust between NSFAS and universities and TVET colleges
• an unstable policy environment, including financing that will ensure student funding policies are sustainable over time.

Most recently, in 2023, NSFAS made several ill-conceived and badly planned administrative changes. One was the introduction of a direct payments solution supported by four fintech companies. Beneficiaries are paid directly by NSFAS and not through institutions and third parties. The change was introduced in the middle of the 2023 academic year, without being piloted and at short notice. It sparked chaos for students and institutions alike. The new “NSFAS bank accounts” introduced in 2023 also forced financial processing costs onto students, reducing the value of their allowances.

The effects of this included delayed confirmation of funding and processing appeals, the late or non-payment of allowances and the over- and under-payment of allowances. The entity blamed institutions for its administrative failures, claiming that they did not submit accurate registration data on time.

Then evidence emerged that the direct payments service providers had been irregularly appointed. The CEO of NSFAS was fired for tender irregularities and the former chair of the board is under investigation. He’s accused of taking kickbacks from the direct payments service providers. The board accepted the recommendations of the report it commissioned from the law firm Werksmans to terminate the payment service provider contracts.

Now NSFAS is again under administration. (It was under administration for the first time between 2018 and 2020.) An administrator has taken over the governance and management of the entity because of concerns about maladministration.

What immediate steps ought to be taken?

NSFAS must focus on building the capacity and systems to support its core mandate. It needs to develop appropriate IT systems and architecture to assess and monitor eligibility. It also needs to provide accurate funding decisions and ensure that qualifying students receive the correct funding at the appropriate time.

This could involve direct payments from NSFAS to students but would require IT systems to be integrated with public institutions. This will not work in the short term. NSFAS has recognised this by requesting that institutions continue making allowance payments to students, as was being done before the direct payments process started.

The entity must also, with the support of the department, address the recommendations of two reports. One is the 2021 ministerial commission of inquiry into NSFAS’s systems and capacity. The other is a ministerial task team report on student funding, finalised in 2022. Neither of these reports have been released publicly but they have been discussed in parliament.

The department has a crucial role to play here. It must ensure policy and funding stability in the student funding arena. In recent years funding has been taken from university subsidies to fund NSFAS commitments. This takes critical support away from institutions as only part of NSFAS funding is spent on tuition fees.

If the challenges are not urgently resolved, generations of young people will be negatively affected and scarce public funding will not serve its intended purpose.

Thandi Lewin, Associate Professor: Ali Mazrui Centre for Higher Education Studies, University of Johannesburg