Itinerant (erratic) Fees Cataclysmic (disastrous) for Higher Education Depriving future students from a livelihood
Honourable guests, ladies and gentlemen; it is an honour and rare privilege to address you on a subject that is very close to my heart, having been a student myself in some institutions of higher learning.
We meet at a very critical time in the country about Higher Education. Since 2015, the tensions in the sector have escalated beyond boiling point, with the now famous or infamous “Fees must fall” movement, depending on one’s vantage point. An important intervention by the National Government of appointing a Commission of Inquiry has only but quelled the tempers for a short while. The volcano, however, is still bubbling below the surface, and your guess is as good as mine that an eruption is inevitable, especially once the much-awaited report is released.
But all of these events offer a rare opportunity for innovative thinking towards addressing the very fundamentals that led to the age-old tensions in the first place. Student debt and rising costs of higher education are a global phenomenon. The model of funding for our Higher Education institutions is nowhere near sufficient for the kind of output expected, compounded further when one considers research outputs that have to compete with other well-resourced institutions the world over.
Managing finances in institutions of higher education requires a new approach and partnerships of trust between all role players. We have seen a widening gap between the private and public sectors over time and institutions of higher learning remain a necessary bridge between these sectors, especially as the graduates serve both sectors. It, therefore, goes without saying that positive partnerships developed to resolve the issue of student debt could become a model for the country at large. Institutions have been forced into a corner even to adopt tough measures of “blacklisting” thousands of errant students, all in an endeavour to encourage some sense of responsibility regarding their outstanding or unpaid fees.
This action, however, warranted, has deleterious outcomes as it disadvantages the very young graduates’ chances of crafting careers or even being considered for scarce jobs in this economic environment.
It is a fact that universities are owed billions of rands in unpaid fees which they badly need to function effectively.
Not all poor students get financial help, but they manage to secure registration money and hope for the best. Some students, on the other hand, secure sponsorships and if they fail, they forfeit the contract, which means that they have to pay off the fees themselves. For those students who don’t pay up, their diplomas or degrees might be withheld until their debt is settled, often putting them in a catch 22 situation.
The debt owed to institutions of higher learning needs to be evaluated and characterised properly as some of the debt is historical and goes back as far as the 1980s. Even more, the disparity between institutions also is of a historical nature, with the scale tilted on the side of institutions with a majority Black African student population.
I need not emphasise the fact that the debt mountain takes a heavy toll on institutions as the fees are quite significant in the budgeting cycle of every institution. Unpaid student debt thus impacts negatively on operations and the problem is growing annually and not dissipating, especially in respect of the ‘low fee increase scenario’ that was part of the negotiated settlement while the Commission was in force. With all factors considered, it is, therefore, becoming increasingly difficult to efficiently and effectively run institutions of higher learning.
However, every cloud has a silver lining, just as adversity breeds opportunity. This subject matter is very close to my heart especially as I have benefitted quite significantly from the SA tertiary landscape, having had the privilege to study at a number of institutions. I was even approached by other university alumni, who were themselves student leaders in the 80s, to start crafting solutions that could make a meaningful contribution to the landscape. Needless to say, home-grown solutions are well crafted and ready to be deployed as soon as universities can embrace the value that alumni, who have further pioneered business in the credit management environment, can bring to the table.
The main drive should not only focus on the collection of outstanding fees, but also extend further to building life-long relationships with former student/alumni to ensure a system of support and stability of the universities going forward and providing the much-needed support for institutional programs in South Africa.
What has been recorded in the media regarding the problems in the sector have painted a grim picture regarding struggling Universities:
- More than R24bn is owed to the National Student Financial Aid Scheme (NSFAS) by past and current students. According to the NSFAS annual report for 2015-16, the entity recorded a loan book with a cumulative nominal value of R24.2bn and a fair value of R7.2bn. During this same period, the entity had to impair an amount of R22m that was owed by institutions. The report stated that this money had been outstanding for more than three years with a slim probability of recovery.
- NSFAS national spokesperson, Kagisho Mamabolo, said the R24.2bn represented two types of loans: ones that were due from graduates, and those loans that were not due as the students were still studying.
- The University of KwaZulu-Natal has a student debt total which runs into the millions. Students who owe the institution money are not allowed to register for further study until they settle their debts. Students in arrears, who have successfully completed their studies, sometimes pay the outstanding amounts, if they are able, closer to graduation ceremonies because they realise they will not be receiving their degrees or diploma.
- Some institutions, such as the University of Venda, have carried the burden of student debt for decades. The institution still has debt of more than R100 million, some dating back to 1982. This problem is not unique to the University of Venda; many of their alumni owed fees to the university. Even though the debt went back many years, the institution did not write off student debt and held on to student records.
- The University of Limpopo is similarly struggling. The institution had a student debt of more than R 81.9m.
- Unisa has 83 905 students, dating back to the 2011 academic year, in debt to the university. The overdue balances are carried over a period of two years from the last academic year of registration. Thereafter, the accounts are written off and handed over to a debt collector.
- At Wits, the procedure is such that if a student does not “voluntarily” discuss ways of repayment, the institution contacts the student, or the person responsible for payment, to develop a “repayment schedule”. Only if this process is unsuccessful, will the university embark on implementing the formal debt collection process. Wits was one of the more “fortunate” institutions as it had the “lowest burden of debt”. The university continues to collect any shortfall throughout the year and does not permit a student to escalate their debt through a further year of registration.
- At the University of Cape Town, the situation is similar although they have a small percentage of outstanding fees.
Great efforts by the Department of Higher Education and Training, in addition to the National NSFAS allocations to universities, need to be applauded. The department made an additional allocation in loans for graduates with outstanding fees who met the scheme’s criteria. The aim of this special funding was, first, to assist unemployed graduates to get their certificates, thereby improving their chances of getting employment, and, second, to improve the cash flow of institutions by settling eligible students’ outstanding debts.
Also, institutions, such as the Walter Sisulu University, have used the helping hand and “longstanding debt has been taken care of in various ways.” The department made “special provision” for final-year students so that they could successfully “exit the system.”
The Department of Higher Education is embarking on the PPP between donors for funding, the students and private sector businesses to build a model for the “poor” and “missing middle students.” This plan aims to bring into play R70 billion worth of donor funding on a model that will allow students to study and start re-paying a low-interest percentage loan only when they earn R250,000 per year.
Funding the “poor” and “missing middle class” students is not the only answer, students who are able to pay for their studies must be reminded and persuaded with a bit of pressure to make amends and repay their study loans.
Significant efforts have been made by the Department of Higher Education and Training, FET Colleges, tertiary institutions and loan/donor funders, to develop policies to administer and manage the awarding of loans to deserving students from underprivileged families. Less has been done, however, to establish policies equally meant to administer and manage the systematic repayment of debt by students who have dropped out of higher learning institutions; exited through successful acquisitions of their qualifications (graduated) and those who stood surety for the recipient of loans.
My humble observations, as to why these institutions haven’t successfully developed policies to systematically recover debt from itinerants, are attributed- but not limited- to the following reasons:
- Institutions are burdened by their core administrative obligations
- Lack of institutional knowledge on management of itinerants
- Lack of technological infrastructure and human capacity
- The (political incorrectness) of swimming against the tide of “fees must fall” campaigns
This observation, therefore, calls for the need of institutions of higher learning, such as NSFAS, to partner with credible and empowered third-party revenue and debt collection companies. These companies’ primary occupation is the conversion of debt to revenue. Most of them have toiled the years dealing with the development of much-needed and sophisticated systems and processes on how best to negotiate, administer and systematically manage collections and repayment of due and payable debt. These partnerships, or relationships, have shown much success in bringing financial relief to many an institution ranging from banks, retail entities, municipalities and government institutions. A further element that lends credibility to these partnerships is that the collection agencies are governed and regulated through legislation.
Having served in the debt collection regulatory space for over 14 years, 10 of which I was a Board Member of ADRA (Association of Debt Recovery Agencies)- an industry self-regulatory institution- and currently serving my 2nd three tenure as a Board Member for Council of Debt Collectors, I can proudly present to you one such company, New Integrated Credit Solutions (Pty) Ltd. (NICS). NICS is a willing and highly able partner to make a positive and lasting contribution to the sector.
NICS is a majority black-owned and managed company embedded with the depth of experience derived from great courage, skill and strength amassed from 16 years of consistent quality performance from a highly driven team of professionals with enviable credentials, experience and expertise to pursue the task at hand with utmost vigour. Our revenue management, debt recovery expertise and overall service offering “The NICS Way” is a credible and timely value proposition to institutions of higher learning and donor funders.
The company boasts, amongst others, the following institutions as its current and past clients viz. UNISA, UNISA SBL, Wits University, University of Limpopo, ABSA, Capitec, Standard Bank, Telkom, Woolworths, SARS, Compensation Fund, COJ, City of Tshwane, City of Cape Town and managing a debt book of R14 billion.
In conclusion, based on surveys conducted with current itinerants, it is crystal clear that defaulting on debt is predominantly as a result of funders’ and institutions’ resources and capacity to reach out and demand that itinerants keep up to their obligations of repaying outstanding debt. Equally true, itinerants are deliberately taking advantage of the gap and deliberately ignoring the obligation to pay and settle their debt. More worrisome is that, it is estimated that it would take these collections from itinerants to fund one new applicant- the more reason we need to accelerate collections and improve numbers to meet the national demand.
My humble submission is that the only way to resolve this national discourse is to part ways with the outdated practice of conducting business in silos, pull efforts by all stakeholders into an integrated plan and forge ahead as a consolidated unit to vigilantly address and resolve this national challenge.
Mr Baker MJ Maseko
Chairman – New Integrated Credit Solutions (Pty) Ltd.
Prepared for: The SAAF Conference, 19th October 2017, Emerald Resort and Casino, Vanderbijlpark.