Higher education is not cheap

The decline in government funding of higher education, along with rapidly rising costs of the different services and products that universities have to provide, have led to steady increases in student outlays over the last decade. There are no indications that costs will go down, neither are there signals that one day university education will be free – as called for by some student association groups.

The government has tried to reconcile the need for more historically disadvantaged students to access higher education and the rising costs of a degree through the National Student Financial Aid Scheme, NSFAS. But over the years, students have complained that too few students are accessing loans and grants and that, for those who do, the loans are not enough to cover study expenses at a top university.

Costs of a degree

Higher Education South Africa, or HESA, a public universities vice-chancellors’ association, has never conducted a detailed study to establish the overall tuition increases over the last decade. But it admits that tuition fees have risen by a certain percentage and that this occurs annually, though it varies among institutions, to keep pace with the costs of running universities.

The cost of higher education is certainly cause for concern in South Africa, says HESA director Dr Jeffrey Mabelebele: “That is why we relentlessly advocate that the state must increase its spending on higher education as a proportion of GDP [gross domestic product], and optimise access of the majority on merit, rather than socio-economic status,” says Mabelebele. “In an unequal society such as South Africa, higher education is the only great leveller between the rich and the poor.”

All institutions should consider a number of factors to determine the students’ full cost of study. These include the cumulative inflation for universities which has been on the increase above the normal Consumer Price Index, Mabelebele says.

The major cost drivers are academic and administrative salaries, the rise in the costs of municipal services, including electricity, water, the cost of powering laboratories, libraries and other teaching and learning amenities, and maintenance of infrastructure.

Higher enrolment rates also come at a huge cost, because they influence academic staff-to-student ratios, he says. In addition, South African universities have a historic debt – money owed as a result of student shortfalls in tuition fees, year-on-year.

NSFAS challenges

The national financial aid scheme is funded by the government to gives loans to poor students but, despite a steadily expanding annual budget, it still experiences shortfalls per student yearly.

Early this year, running battles were witnessed across the country when students who owed fees or were excluded from the scheme took to the streets to express their anger. Last year, the fund disbursed R8.2 billion (US$0.7 billion), a significant increase over previous years – and benefitting more than 400,000 students at universities and further education training colleges throughout the country.

As the cheapest source of funding for poor students, the fund provides loans to students whose parents can't afford to pay for their studies. In addition, 40% of the loans are converted to bursaries every year if a student passes all his or her courses. The full amount of the loan for the final year of study becomes a bursary when a student graduates.

In 2014, the government allocated R254 billion (US$23 billion) to education, while the sector received R240 billion in 2013. The allocation to the NSFAS will increase from R5 billion last year to R6.6 billion in 2016-17.

“In our country, higher education is recognised as a public good and is therefore highly subsidised by the state, given our history,” Mabelebele says.

He says the impact of rising costs has also been felt from the rand-dollar exchange rate on the cost of library holdings, as a result of most books and materials for libraries being bought from dollar-denominated countries.

“Increases in student fees have had adverse consequences on students’ ability to access higher education and for those in the system, a low throughput rate has led to high drop-out rates,” he says.

While South Africans find higher education in the country expensive, Mabelebele says the cost of university education is comparatively low compared with international institutions. Viewed in dollar terms and the fallen rand value, South Africa’s degrees will be perceived as much cheaper in comparison, he says.

A cost trend

“Universities are very expensive to run,” says Riana Geldenhuys, head of media liaison at the University of Cape Town, or UCT, one of the three most prestigious universities in the country.

She says at UCT, close to 65% of costs are associated with highly qualified and experienced staff, while a further major cost is the provision and maintenance of the university’s estate. Costs also include a wide range of support services such as libraries, laboratories, transport, security, counselling and healthcare services, in addition to the cross-subsidisation of financially disadvantaged students.

The university’s first-year tuition fees which are all-inclusive range from R39,000 to R58,000 (US$3550 to US$5300) in 2014. Postgraduate tuition fees range from R16,250 for a doctoral course to R85,000 for an MBA at the UCT Graduate School of Business.

“In other words, the university does not charge additional fees for items or services such as transport or fieldwork costs, internet or Wi-Fi access, levies, laboratory fees, PC lab access fees and instrument costs,” Geldenhuys says, adding that from 2008 until 2014, UCT’s fee increases in real terms amounted to 3% a year.

Implications of rising costs

The increase in tuition fees does not equate to the “commodification” of higher education, says Dr Gerald Ouma, director of institutional planning at the University of Pretoria.
“Universities are not trading in higher education; they are increasing fees to cope with rising costs in a context of declining – in real terms – state funding,” Ouma says.

He says various policy documents, including last year’s report of the Ministerial Committee for the Review of the Funding of Universities, acknowledge that block grant allocations to universities have not kept pace with inflation or with student enrolment growth. This has led to a decline, in real terms, in income per full-time equivalent enrolled student.

The high cost that has led some black students to call for free higher education and Ouma says they are justified. “But there is a difference between affordable higher education and free higher education. While free higher education means that students receive full subsidisation from the state, affordable higher education means that the state makes available mechanisms such as student loans and bursaries to support deserving students to participate.

“The call for free higher education is, however, understandable given the inadequacies of the NSFAS where the demand outstrips by far the existing resources. Many students deserving of NSFAS support are not receiving it. Hence, given the limitations of NSFAS in a context of increasing tuition fee regimes, demand for free higher education seems to be a politically rational (even though economically unsound) recourse.”

South Africa has a cost sharing model where beneficiaries share the costs of their higher education, Ouma says. Fee increments do not imply that this model has failed, rather that increasing tuition fees due to rising costs is actually an essential feature of cost sharing.

“It should be emphasised that increasing tuition fees is not some kind of a hobby that universities enjoy; it is a response to their conditions of existence, such as increasing costs, incommensurate state funding, limited possibilities for third stream funding, among other requirements.”

He adds that when cost sharing becomes an obstacle to access and successful participation in higher education, then strategic interventions become necessary to cushion the poor and vulnerable. That is achieved by increasing state funding for universities, strengthening NSFAS and offering bursaries to the poor.

Ouma says the cost of higher education can be kept low in South Africa if universities were to cut costs, contain wastage and operate efficiently. He says rethinking modes of delivery, such as distance education and online education, could also help.

“Universities must realise that perceptions of unaffordability have implications for their legitimacy as public institutions and also their stability. We've recently witnessed student riots that have been blamed on inadequate NSFAS support,” he says.