Loans give students incentive to graduate

The study, featured in the latest issue of Focus, published by the Helen Suzman Foundation, reveals the loan scheme is more successful than previously thought. The loans it provides give poor students the ability to study, but also provide a greater incentive for students to complete their studies.

NSFAS has grown tremendously over the past decade and the government last year spent R5.1bn on student loans. However, there have been questions around its value as previous studies have revealed that large numbers of beneficiaries drop out before graduation.

A 2010 ministerial committee reported that only 19% of NSFAS beneficiaries had completed their studies over the years.

But, says Van der Berg, previous studies were based on limited data and did not track students over a long enough period.

According to the study, students - not just in SA but everywhere - tend to take much longer than the minimum period to complete a degree. Large numbers of South African students drop out before obtaining a qualification but in comparison with students who are not supported by NSFAS, the supported students perform surprisingly well.

Students do better

"The cumulative performance of the NSFAS students is better than that of unsupported students. At the end of nine years, 55% of NSFAS students had attained qualifications compared with 48% of the non-NSFAS students," he writes.

This gap is especially significant as a good proportion of non-NSFAS students have an educational advantage over NSFAS beneficiaries. To qualify for the scheme, a means test is applied, meaning NSFAS beneficiaries are poorer and tend to have been educated in inferior schools.

In seeking to explain why NSFAS beneficiaries do better, Van der Berg rules out the contention that they take easier courses or are smarter, as financial need is the only selection criteria.

"The only conclusion we have been able to draw is that the advantage arises from a determination to complete their studies among NSFAS students.

"Despite the odds being against them, NSFAS-supported students achieve more than other students do. This may be related to the incentives they face: repaying the loans will be more difficult if they don't get a degree or diploma, and there would be more to repay, because (part of) the loan is not converted to a bursary," Van der Berg states.

The result is that funds paid to NSFAS have made a substantial difference. Education is essential to breaking the cycle of poverty: the probability of employment among those aged 25-30 rises to 88% for graduates compared with only 69% for those with matric. Only 2.5% of graduates find themselves among the poorest half of the population.

A loan scheme, rather than a bursary, is a "very good way of providing an incentive to perform for poor students who are often from weak academic backgrounds," he says.

Source: Business Day via I-Net Bridge