South Africa NSFAS Helped Millions But Was Trouble. The South African National Student Financial Aid Scheme (NSFAS) has long been a beacon of hope for millions of students who sought to break the cycle of poverty through education. Established with the noble goal of providing financial aid to students from low-income families, NSFAS has supported over 5 million beneficiaries since its inception. But while the organization has played a vital role in transforming access to higher education, it is now grappling with significant challenges.

On May 11, 2024, the country’s Higher Education Minister, Blade Nzimande, announced the dissolution of the NSFAS board, placing the organization under administration. The decision stemmed from ongoing issues, including delayed payments, administrative failures, and allegations of financial mismanagement. So, how did an entity that has helped so many fall into such disarray, and what steps must be taken to restore it?

The Impact of NSFAS on South African Education

NSFAS was created in 1999 under the Department of Higher Education and Training to provide financial aid to students attending public universities and technical and vocational education and training (TVET) colleges. For many students, especially those from impoverished backgrounds, NSFAS has been the only path to higher education.

By 2021, the scheme funded 826,084 students, with 67% attending universities and the remaining 33% enrolled in TVET colleges. An astonishing 61% of undergraduate students in South Africa’s public universities rely on NSFAS to cover their tuition fees, textbooks, and living expenses.

This financial aid has significantly improved student success rates. Studies from the Department of Higher Education show that NSFAS-funded students have higher retention and completion rates than their peers without such support. For instance, students who began their university studies in 2013 with NSFAS funding had a 10% lower dropout rate and an 8% higher qualification completion rate.

In this light, NSFAS has played a crucial role in transforming the demographic profiles of South African universities, enabling greater access for historically marginalized communities.

How Does NSFAS Funding Work?

To qualify for NSFAS, students must meet specific financial and academic criteria. First, the annual family income of applicants must not exceed R350,000 (approximately USD 19,000). Additionally, students must be enrolled in a funded program at a public university or TVET college.

Automatic eligibility is granted to beneficiaries of the South African Social Security Agency (SASSA), and students must also maintain good academic standing to continue receiving financial aid. The scheme’s eligibility is determined using data from applicants, which is verified by the Department of Home Affairs and the South African Revenue Service.

Collaboration between NSFAS, academic institutions, and other governmental bodies is essential for the system to function effectively. But as recent events have shown, this complex operational ecosystem is under immense strain.

NSFAS in Trouble: What Went Wrong?

Despite its success in broadening access to education, NSFAS has faced increasing scrutiny in recent years due to serious administrative and governance failures. Some of the biggest challenges include:

1. Inadequate Systems and Capacity: NSFAS’s internal systems have not kept pace with the growing demand for student funding. This lack of capacity has led to payment delays, mismanagement, and incorrect fund disbursement.
2. Poorly Executed Administrative Changes: In 2023, NSFAS introduced a direct payment solution through four fintech companies, allowing students to receive funds directly rather than through their academic institutions. This change, introduced mid-year without proper piloting, caused widespread chaos. Many students experienced delays, overpayments, or underpayments, adding unnecessary stress during their studies.
3. Unstable Policy Environment: Funding policies have shifted unpredictably, contributing to an unsustainable financial aid system. In some cases, university subsidies were redirected to cover NSFAS’s shortfall, leaving academic institutions struggling to maintain quality education and services.

The introduction of “NSFAS bank accounts” in 2023 was particularly contentious. Students were suddenly burdened with additional financial processing fees, reducing the overall value of their allowances. In many cases, they were left without access to their funds, exacerbating frustrations and delaying their ability to pay for essential living expenses.

Governance and Financial Mismanagement

The situation worsened when it was revealed that the fintech companies responsible for direct payments had been appointed irregularly. NSFAS’s CEO was fired over tender irregularities, and the former chair of the board is currently under investigation for allegedly accepting kickbacks from these companies.

These scandals culminated in the Higher Education Minister’s decision to dissolve the board and place NSFAS under administration for the second time in its history (the first time was between 2018 and 2020). With an administrator now at the helm, the organization faces an uphill battle to restore its credibility and improve its operations.

What Needs to Be Done?

The road to recovery for NSFAS will not be easy, but several immediate steps could stabilize the organization and help it fulfill its mandate more effectively:

1. Rebuild Capacity and Improve Systems

NSFAS must develop robust IT systems capable of accurately assessing student eligibility and distributing funds efficiently. The existing systems are not equipped to handle the scale of operations, leading to delays and errors. By investing in better technology, NSFAS can streamline the payment process and reduce the administrative burden on both students and institutions.

2. Work Collaboratively with Institutions

The relationship between NSFAS and academic institutions needs to be rebuilt on trust and collaboration. Universities and TVET colleges are crucial partners in managing student funding, and any changes to the payment system must be made in consultation with these institutions. The return to institutional-based payments, as NSFAS has recently requested, is a step in the right direction.

3. Address the Findings of Key Reports

There are two important reports that offer a blueprint for NSFAS’s recovery: the 2021 Ministerial Commission of Inquiry into NSFAS’s systems and the 2022 Ministerial Task Team Report on student funding. Although these reports have not been made public, they have been discussed in Parliament and must now be acted upon. Implementing the recommendations will be crucial for NSFAS to regain stability and credibility.

4. Ensure Policy and Funding Stability

The government must ensure that student funding policies are predictable and sustainable. Redirecting funds from university subsidies to cover NSFAS shortfalls is not a viable long-term solution. Instead, a more stable and transparent funding model is required to ensure that students continue to receive the financial aid they need without compromising the quality of higher education in South Africa.

Conclusion

NSFAS has been a lifeline for millions of South African students, allowing them to pursue higher education and break the cycle of poverty. However, it is now in serious trouble due to governance failures, administrative missteps, and financial mismanagement.