Hidden threat to South Africa’s universities

Rising student debt is becoming an increasingly pressing problem for South Africa’s biggest public universities, threatening their financial sustainability.

This, combined with shrinking government subsidies and problems with the National Student Financial Aid Scheme (NSFAS), is placing severe pressure on South African universities.

Many of South Africa’s major universities raised this problem in their latest annual reports.

South Africa’s largest university, the University of South Africa (Unisa), explained in its 2023 Annual Report that it carries a significant historical debt of over R830 million, which continues to grow with each passing semester. 

Unisa recorded R606.56 million as impaired from student debtors that are over 120 days in default in its 2023 financial year.

North-West University (NWU) noted that it had to write off R90 million in 2024 as irrecoverable and doubtful student debt, up from R38.9 million the year prior.

Similarly, the University of Pretoria (UP) flagged rising student debt as a major risk in its 2024 Annual Report, where it revealed that its gross student debt amounted to R927.9 million.

The institution said this debt represents nearly 30% of the university’s total tuition and other fees billed for 2024, and a 37.7% increase from 2022 to 2024.

UP attributed the rise in debt to several factors, including insufficient funding to support “missing middle” students and South Africa’s ongoing economic decline.

The university also highlighted the demand for fee-free higher education and the capping of accommodation fees by NSFAS as contributing factors.

The University of Johannesburg (UJ) also pointed to the state of local and global economies as factors that impacted its ability to collect outstanding student debt.

The institution explained that its student debt has increased significantly over the past five years, particularly for students who are no longer registered with the university.

UJ’s outstanding debt from cash-paying students remained at 14% of its fee income in 2024, with a significant increase in debt due from students who are no longer registered.

The university explained that this makes the task of collecting debt increasingly more difficult, as students tend to postpone the settlement of outstanding debt until registration for the next year.

NSFAS headache

Issues with NSFAS are a common problem among South African universities, with many pointing to administrative issues at the scheme as a significant struggle.

Newsday reported that while the scheme has supported millions since its inception, it faces significant operational and systemic challenges.

This includes delays in disbursements, limited administrative and ICT capacity, high loan non-repayment, oversubscription, and issues of corruption, mismanagement, and underfunding.

The University of Cape Town (UCT) said the issue of increasing levels of student debt is compounded by the implementation of the NSFAS-imposed fee cap on student accommodation.

The institution explained that NSFAS is the largest funder of undergraduate student financial aid across the higher education sector and at UCT.

However, in 2023, NSFAS changed its full-fee-free funding model to apply an accommodation cap of R50,000, resulting in a funding shortfall for students whose accommodation costs exceeded this cap.

While UCT was able to assist students in 2023, the institution said it could not meet the R150 million shortfall faced in 2024, resulting in increased student debt.

It said NSFAS being placed under administration for a second time exemplifies these challenges.

The institution further warned that these ongoing issues create the risk of student protests, as they threaten students’ financial stability, accommodation and food security.

NWU also highlighted this issue in its 2024 Annual Report, saying dwindling government grants also play a major role.

The institution said the government funding model is not sustainable, and the higher education sector requires more information on this model from the Higher Education Department. 

“Furthermore, the impact of the funding model is not known. This uncertainty is exacerbated by the sector’s overdependence on a single source of income (government subsidies and questions over the sustainability of NSFAS),” it said. 

Stellenbosch University (SU) pointed out that while NSFAS absorbs more than half of South Africa’s higher education resources, there are growing concerns around the programme’s efficiency and reliability. 

“NSFAS has capped student accommodation allowances well below current rates, and non-payment of allowances through appointed service providers has caused significant hardship for students reliant on the scheme,” the institution said.

“Delays in funding disbursements from NSFAS and Sector Education and Training Authorities have compounded financial difficulties for universities.”

To address the shortfall created by NSFAS’s funding cap, SU provided R7.4 million in bursaries to 665 students.

The university also arranged for NSFAS students in catered residences to receive a free meal daily when their meal quotas ran out.