President Zuma’s announcement last Friday of a zero fee increase is a hollow victory for students, regardless of whether or not his government makes good the resulting R3 billion shortfall in fee income to universities. But the student protests will be successful beyond their wildest dreams if they catalyse a radical overhaul of our current dysfunctional approach to university funding and produce a fair system that provides access to higher education for every qualifying student.
I don’t think anyone has all the answers right now, but I’d like to share with you my current thinking on the matter. The solutions may evolve as the debate continues, and I would love you to share any ideas with me that you may have.
Equitable access is affordable
As I see it, there are really two key questions: Can South Africa afford to give access to higher education to every qualifying student? And if so, how is this best achieved?
To the question of affordability, I would answer that if we make opportunities for young people a top priority, as it should be, and craft our policies and spending accordingly, then we can certainly afford to give access to every qualifying student. There are a lot of other things that we are affording right now, even with our unnecessarily sluggish economy, that are not remotely as important as investing in our youth and our future:
- an over-sized, over-paid, ineffectual public sector;
- an inefficient state airline that needs regular bailing out;
- and more foreign missions across the globe that any country in the world bar the US.
To name but a few.
But it is how we do it that I would like to talk about today. To arrive at a higher education funding model that best meets our objectives, we must first be very clear on what those objectives are.
Higher education objectives
Our objectives for university funding are essentially threefold: to ensure access to every qualifying student regardless of ability to pay; to provide the necessary skills and knowledge that SA needs; and to reduce inequality in our society.
Free higher education for all is not fair in today’s SA
There is no such thing as “free” education. Ultimately, someone has to pay and it is either the general public (in the form of a state subsidy to universities) or the student (in the form of fees) or some combination of the two. When the state pays, we have to consider that the money could have gone directly to poverty alleviation. For the system to be truly fair, it must be fair between one student and another, but also between students and the general public.
A university education is part private good, part public good: it confers both a private benefit to the graduate (in the form of a higher future personal income stream) and also a public benefit to society as a whole (which can take many forms – economic growth, improved health services, better engineered infrastructure etc.).
To the extent that a university education confers a public benefit, it should be publicly funded, via subsidy from state to university. Similarly, to the extent that it confers a private benefit to the graduate, that individual should cover that cost, via student fees.
Thus, a fair system requires university education to be funded by a combination of state subsidy and student fees. A state subsidy alone, commonly known as “Free Education for All”, would be a regressive policy. It would tend to increase inequality because public funds that could be spent on poverty alleviation are instead paying for an individual’s future higher income stream. This is especially regressive in the case of high-income students. But it is also the case for students who are poor now but will be rich once they graduate.
Free education for all makes sense in countries that have a broader tax base and lower inequality, such as Germany. But with SA’s narrow tax base and high inequality, we just cannot afford it and it wouldn’t be fair.
Student fees drive efficient choices
There is another reason why student fees are important: efficiency. When you pay for something, you value it and you have an incentive to make choices that give value for money. This is the market mechanism at work. It supports our second objective: that of providing the necessary skills and knowledge that SA needs.
The question then becomes: how do we retain the student fee element of university funding but also ensure that no student is denied because they can’t afford the fees?
Risk-free education at the point access
Obviously any student that can afford to pay fees or part-fees upfront, by private means, or through a bursary or commercial loan, should do so. Any student that cannot, must be given a state-funded (or state-secured) loan. This loan could be a full loan, or part-loan relative to genuine need. Crucially, this loan must also cover food, accommodation and textbooks if necessary, otherwise access is still effectively being denied.
State-funded loans are administered through NSFAS, the National Student Financial Aid Scheme. The threshold to qualify for a NSFAS loan needs to be high enough (family income of around R500 000 perhaps) to include the current “missing middle” group of students. These are the children of policemen, teachers, nurses and the like, who are neither rich enough to pay upfront nor poor enough to qualify at NSFAS’s current low threshold of R120 000.
So for poor students, the entire cost of a university education, including living costs where necessary, should be covered by state-funded loans, the repayment of which should only kick in when and if the graduate earns an income, and then should be relative to that income. This is known as an “income-contingent deferred-fees” funding model. NSFAS should thus be partially self-funded, though SARS is best placed to recover these loans on NSFAS’s behalf.
State subsidy is regressive unless graded by income
The state subsidy associated with high income students (say with family income over R800 000) should perhaps start to decline as income rises, with the shortfall being paid by the student in the form of increased fees. So the more a high-income family earns, the higher is the fee component and the lower is the subsidy component. This makes for a highly progressive system – one which tends to decrease inequality in society.
The model I have outlined above is appealing to me because it is fair, efficient and ensures access even for the poorest student, being risk-free at the point of entry. It also provides scope for government to convert loans to bursaries or part-bursaries for degrees which are strongly in the public benefit and in scarce supply. This model could provide a basic funding framework, but there is still a lot of room for creative thinking.
For example, perhaps the 21st century university should be doing a lot more to harness the technology that is increasingly available to us today. The internet may yet be the greatest leveller or all. A cheap tablet could soon bring our students the best and latest textbook content and world’s top lecturers at prices not deemed possible a decade ago.
Quality higher education requires quality basic education
But to really maximise university education in SA – and opportunities for young people as a whole – we need to view it in its full context. Our university system will only be great when it is underpinned by a first class basic education system.
And that is far from the case right now. Which means we also need to address the question of fairness relating to which matriculants qualify for a university degree in the first place. Even the brightest, most conscientious child from the poorest family cannot hope to compete with a student of mediocre ability from a high-income family.
One way to level the playing field a bit could be to guarantee university access to the top 10% of matriculants in every school in the country. This idea rests on the fact that while access to a quality basic education is very unevenly distributed, innate ability and attitude is randomly and thus evenly spread. Since our universities can accommodate about 25% of school leavers, this still leaves plenty of room for other qualifying students.
University just one of a range of options
We must also broaden the options for school leavers, so that university is one option in a broad array, including technical schools that equip young people with specific skills, vocational schools such as teacher training colleges, and apprenticeships.
All of this is still speculation on my part, but what I know for sure is that a fair and efficient system that provides access to all qualifying students is well within SA’s grasp. We just need honest, caring, capable leaders and voters who back them and hold them accountable.