Access to education should be an employee benefit
Recent statistics coming from America on the factors contributing to the country's high levels of debt should serve as a wake-up call for South Africa, particularly the lengths to which their employees go in order to access education financing.
According to a report published in The Business Insider earlier this month, student loans in the US have become the leading cause of high levels of debt among young Americans, who take out bank loans in order to pay for their tertiary education.
Last year, according to an article entitled "Student Loan Debt Is Crushing The American Dream", student loan debt surpassed the USD1 trillion mark, exceeding for the first time even the total amount of credit card debt. At the same time, student loan defaults are on the rise, the US Education Department revealed, to 8.8 percent from 7 percent the previous year.
South Africans are over-indebted
While no official and comprehensive statistics exist as yet for South Africa, the picture cannot be that different. It is common knowledge that South Africans are over-indebted.
According to the National Credit Regulator, more than 70 percent of the country's households are living from pay cheque to pay cheque. The implications of this are many. Of concern and interest to Eduloan is the impact that this is having on working South Africans' ability to further their education and that of their next of kin, due to an inability to afford student loans and, most commonly, failure to qualify for a loan due to their credit record.
Recognising the importance of education, the government has ensured that its departments recognise access to education as an essential employee benefit. Since Eduloan's inception in 1996, civil servants studying via this education financier have automatically qualified for loans without being subjected to credit checks and other forms of scrutiny.
Repayments deducted from salaries
To ensure that they do not default on their loan repayments - which Eduloan offers at a fixed interest rate of 10 percent - Eduloan has an arrangement with civil servants and their employer for the loan repayments to be deducted from salaries, as is done for other employee benefits, like pension funds, medical aids, and life insurance.
To date, Eduloan has disbursed over R3 billion in student loans to more than 620 000 beneficiaries.
But most importantly, the arrangement has changed how civil servants view access to education. For government departments, benefits include a better-skilled labour force and better relationships with employees, who appreciate the array of benefits afforded to them. The arrangement also re-emphasises the notion that the government is truly committed to enabling access to education for its employees and their families.
By including access to education as an employee benefit, corporate South Africa can also get to enjoy the same advantages - and this is what Eduloan is driving.
With the growing focus on good governance globally, there's a greater expectation for companies to be good corporate citizens - and employees are aware of this.
Change has started
A study released in the US a few years ago warned that although potential employees have had to motivate why an organisation should hire them, this was going to change - and it has started.
The global race for skilled personnel, a limited pool, is driving the trend. Increasingly, companies are having to motivate to potential employees why they should join their organisations. High on the list of what they seek, other than financial remuneration, is access to opportunities and development. Corporates cannot claim to offer this if they do not recognise or treat access to education as an important employee benefit.
While that trend has yet to gain traction in South Africa, it is only a matter of time until companies once again have to compete on the benefits they offer their most valuable asset - their employees. This is in addition to medical aid, pension funds, or the array of in-house employee-development programmes many now have. On the latter, the reality is that in-house programmes are not accessible to every employee, nor are company-paid education and bursaries. It is this gap that Eduloan has a track record of filling and it believes its offering can work for corporate South Africa.
Eduloan's database shows that about 94 percent of people to whom it lends money are black South Africans, of which 63 percent are aged between 31 and 45.
More than one student loan
The value they have received in dealing with Eduloan is the ability to take out more than one student loan for themselves and, in many cases, their children, and even the children of their domestic workers. With Eduloan, it is all possible because of the lending rates. Additionally, the rates make it possible for people to repay their loans sooner, with repayment periods spanning between six and 24 months, unlike bank loans, which can take up to six years to pay off.
It is important that corporate South Africa really takes a look at its role in making education accessible to employees, and, like the government, come to regard it as an important employee benefit.
A partnership with Eduloan presents a win-win situation for all involved and will serve to prioritise education, with employees getting their monthly nett salaries with the loan repayment already deducted - leaving them to focus on other things.
We are proud to report that there are those in the industry who have begun to see the light. In making education accessible for even the most financially stretched individuals are blue-chip firms such as: Eskom, British American Tobacco (BAT) Holdings, Gijima Holdings, McDonalds SA, KWV SA, and Golden Leopard Resorts. Several universities have also come on board, including Stellenbosch, Nelson Mandela Metropolitan, Rhodes, Zululand, Venda, Walter Sisulu, UNISA, and the Tshwane Institute of Technology - and municipalities too, but more still needs to be done.
About the author
Michelle Branco is chief commercial & marketing officer of Eduloan.