Students have a number of options in order to fund their studies, including personal funding, bursaries or scholarships from a private business or funding scheme such as The National Student Financial Aid Scheme (NSFAS). If these methods of funding are not an option, student loans enable many students to access tertiary education, however, these loans may have future financial implications.
There are over 1 million students that were enrolled at public universities in 2017, and there are over 60 000 students enrolled at the University of Pretoria alone. NSFAS spokesperson, Kagisho Mamabolo, told PDBY that “NSFAS supports access to, and success in, higher education and training for students from poor and working-class families who would otherwise not be able to afford to study”. NSFAS funded 721 866 students in 2019 of which 378 122 students were enrolled at a public university. A student qualifies for NSFAS funding if their combined household income is under R350 000 per annum.
This is as a result of the challenges surrounding NFSAS funding and fee mismanagement before 2015. Beforehand, students qualified for funding if their combined household income was less than R122 000 per annum and students still had to cover some of their own expenses.
“NSFAS supports access to, and success in, higher education and training for students from poor and working-class families who would otherwise not be able to afford to study”
Recently, The Higher Education Minister, Naledi Pandor confirmed that R967 million will be allocated to pay off this historical debt. The debt to universities is a result of mismanagement of funds leaving many students that registered pre-2015 with extensive debt. As a result, these students were blocked from graduation and registration.
This left many students in a situation where they need to work to pay off their debts in order to get their degree, but at the same time not having their degree to secure a respectable job in order to pay off their debts.
Alternatively, students can take out a student loan from a bank-a student and a primary debtor, typically a parent or guardian, loan a sum of money and the parent pays off the interest until the student graduates. The student then pays off the dormant loan money. Student loans are sometimes the only option a student has in order to afford and access tertiary education. It is widely considered that having a degree significantly increases an individual’s chances to find a well-paying job.
Although student loans help students to obtain a degree they also create a lot of financial strain on an individual with the looming reality that they need to pay back thousands, if not hundreds of thousands of rands. When FNB, Capitec and ABSA, were asked to comment on how much debt students owed these banks, they declined to comment.
One factor that contributes to the increased financial strain is that of extremely high-interest rates. It would be expected that interest rates on student loans would be lower in order to aid students financially. Some banks give a personalised interest rate based on a credit assessment in order to give the best deal possible.
“Student loans are sometimes the only option a student has in order to afford and access tertiary education.“
When ABSA was asked to comment, Cowyk Fox, Managing Executive: Everyday Banking, Retail and Business Banking, Absa Group, told PDBY that “At Absa, we understand the importance of education for the upliftment of society and its role in the overall improvement of our economy. Therefore, we offer the best interest rate in the market, at prime.”
Having large amounts of debt makes it more difficult to start building one’s financial affluence. Paying off the debt can hinder students economically and reduce the speed at which wealth is accumulated. It will also make it hard to secure more credit when buying a car or a house.
Students are encouraged to be responsible when taking out a student loan and to refrain from spending the money on miscellaneous instead of their needs. Fox advises that students “Firstly, ensure that the institution of choice is recognised and accredited by the correct authorities, check the opinions of the institution’s graduates, the quality of lectures, etc.
“Having large amounts of debt makes it more difficult to start building one’s financial affluence.“
Secondly, obtain as much information about the institution as possible – this is a life-changing experience, it is therefore vital to invest sufficient effort. Thirdly, be clear about the total costs involved (including tuition, accommodation, books, any other relevant costs). Fourthly, when applying for credit, ensure you understand what’s expected of you during your studies and after your studies.
Lastly, as you finance your study loan over subsequent years, understand the impact on the overall loan and ensure you are monitoring this as the years progress.” Often the only way that students are able to pursue their tertiary studies is through taking out a student loan or relying on National Funding Schemes. Taking the route of debt is challenging, but still a way of achieving one’s degree and long-term aspirations.