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Free Education Is Unachievable

Free university education for the poor in South Africa is feasible, but will require significant additional funding of both National Student Financial Aid Scheme (NSFAS) and the university system.

– The Working Group on Fee-Free Education for the Poor55

It is the 23rd of October 2015. Thirty thousand students are marching on the Union Buildings. They want free education, and they want it pronto. They won’t be deterred by tons of tear-gas-toting police officers, fresh from campus-cum-warzones, glaring back behind barbed-wire fences. Everyone knew this was coming, but no one seems prepared. Across the country, the police release pink smoke bombs, which rise like ironic clouds of authoritarian fairy dust around fallists of every stripe and description. Welcome to the future … the future we tried to avoid. Debates over free education have split South Africa. Students vehemently maintain it is possible; University bureaucrats, government ministers and the commentariat think not. The students are right: it’s time to debunk the myth that free education is unachievable.56

The global picture

Exorbitant university fees are a relatively recent phenomenon. In China, Britain and Australia, tuition fees were only introduced about a decade and a half ago.57 The global picture is diverse, though the trend is towards rapid fees increases. For example, in the United States, fees have increased exponentially since the mid-1990s. In 1974, a public college’s four-year tuition cost an American $10 000 in 2015 prices; today it costs $32 500.58 The argument was that financial aid would offset these price hikes, but this has led to a debt bomb compared with the housing crisis of 2008.59 Since 1990, the cost of higher education increased at double the rate of healthcare and quadruple that of inflation.

In Britain, since Tony Blair’s ‘New Labour’ introduced tuition fees in 1998, students have experienced their fees skyrocketing from zero to £9 000 per year in less than a decade. The same is true in Australia, where tuition fees began in 2001 under the Higher Education Contribution Scheme, an income-contingent loan system administered by the tax authority. Thailand too operates a funding scheme through an income-dependent post-employment loan.60

The situation is different in the BRICS nations. In Russia, free education remains a constitutional guarantee, but the government has expanded the definition to meet demand: Russians sit an entrance exam to determine which students are eligible for free education.61 Students who fail the exam still pay tuition fees, or are subsumed by a growing private tertiary education sector. In Brazil, most of the country’s most prestigious public universities are free. However, attendance at the institutions is dominated by relatively wealthy students.62 As in Russia, a large private sector has ironically incorporated the residual poor students who pay fees. In India, tuition fees exist, but needy students are covered by a loan scheme similar to the South African model.

In several Scandinavian countries, Scotland, and Germany, education is free. In fact, in countries like Sweden, students are paid to go to university. Even international students benefit from free education in some European countries. Recently, some universities in these countries have begun charging very low, almost symbolic fees, but even these steps have been challenged by student protests. Thus, over the last two decades, an assault on students’ pockets has left all but a few places in the world untouched by the rampant march of fees.

The South African picture

There are 26 universities in South Africa, of which twelve are ‘traditional universities’. These focus on academic subjects, and include institutions like the University of Cape Town (UCT) and the University of the Witwatersrand (Wits). Eight of the 26 are universities of technology, which have a vocational focus. These include institutions like Durban University of Technology and Cape Peninsula University of Technology. The remaining six are comprehensive universities which deal with both vocational and academic subjects. They include universities like the University of Johannesburg and Nelson Mandela Metropolitan University.

Furthermore, there are over a million students at South Africa’s universities, double the number since 1994. In 2017, government will spend about R65bn on higher education via subsidies, covering half of universities’ current costs. The other half is covered by private donations and student fees. Over the last decade, universities have dramatically increased the burden borne by students as a proportion of total funding, which increased by an incredible 30% between 2000 and 2012. Universities say this is because the government subsidy fell over the same period, but this is not accurate: the subsidy contributed relatively less to the total as fees rose, but fees often rose much faster than the subsidy fell. For universities to suggest that they were responding to lower subsidies alone is incorrect: they used this as a guise to transfer costs disproportionately onto students. This is evident in the fact that, in some years, the subsidy actually increased in real terms and fees still increased. Between 2010 and 2012, nominal fees revenue increased by 43%.

However, cost-transfer has not been spread evenly. As Figure 1 shows, universities like UCT, UJ, and Wits transferred the proportional contribution of fees onto students more than other universities between 2009 and 2015. On the other hand, universities like Mangosuthu University of Technology (MUT), Walter Sisulu University (WSU), and Vaal University of Technology (VUT) actually reduced the burden in some years of that period.

Figure 163

Defining free education

Can South Africa afford free education? If so, how soon? This depends on what we mean by ‘free education’. The term is sometimes just used to describe affordable fees. Others mean that the whole educational experience is free, including meals, accommodation, books, study materials, travel and a stipend for living expenses. Still others mean free tuition: no student would have to pay for their courses, and they would not be accepted based on their ability to pay fees for a given course. Here, I will focus on free tuition, which is the first step to a fully free educational system and the most achievable policy option in the next five years.

In this context, the best figures we have for total university fees revenue come from a report from 2012, published by PwC. In that year, total fees revenue was R15bn. The South African budget was about R1tn. Therefore, to fund every student at South Africa’s universities, government would need to find an additional R15bn per year, on 2012 prices.64 This could happen in various ways. First, it could happen through economic growth, but let’s assume that growth is stagnant. Another option would be raising additional tax. This would mean increasing corporate and income tax by about 1% each. Those who squirm at this thought should be reminded that businesses are already offered tax breaks for donations to universities. A possible alternative arrangement could be to pressure corporations to donate to a special tax-incentivised fund for free education.

Alternatively, the money could be found by reallocating money meant for other governmental projects, or reducing wasteful expenditure and corruption. Indeed, the total amount of wasteful expenditure in any given year in South Africa averages about R30bn. Or, government could run a budget deficit that is R15bn larger, and borrow the sum needed which would make only a minimal dent South Africa’s debt-to-GDP ratio. A more sophisticated way of doing this would be issuing a government bond on the open market.65 Government routinely spends amounts of R15bn. To put the number in perspective, the projected amount to be spent on infrastructure between 2009 and 2030 is R1tn.

But the costs reduce further when we consider that free education would neither have to reach all students, nor need to be implemented immediately. If we limited it to undergraduate students, this would mean that about 800 000 students, by current numbers, would remain, reducing the funding needed to about R12bn. If we further assume that wealthy students, who make up the top 20% of income-earners, would also be excluded, the number reduces further to about 640 000 students or R10bn. Now, instead of needing to raise an additional 1.5% of revenue, government would only need to raise 1%. If the programme was limited to students currently on the National Student Financial Aid Scheme (NSFAS), funding for only 400 000 students would be needed, or about R6bn; R6bn to provide free education to all NSFAS students is an astonishingly low amount.

Yet the amount falls even further if free education is implemented progressively. If the project was piloted in the first year, to 10% of all students, that would cost only R1bn. This would still cover an enormous 100 000 students. The pilot could be tried in a given number of universities, or it could be implemented in a specific cohort of students, for instance final-year undergraduates. Each year, the project could expand proportionally so that government would only need to raise at most R3bn per year. So, we could pay for free tuition for more students than are currently on the NSFAS, over a period of five years, by raising only R11bn. The costs would be even lower with private-sector assistance. The facts are clear: free education is not only possible, it is also affordable.

Frustratingly, government refuses to accept this because it uses the extreme definition of ‘free education’, which means funding everything immediately. But just because something is not necessarily feasible tomorrow does not mean that nothing can be achieved urgently; the false dichotomy between a pure loan system and a Swedish utopia is a hindrance to progress. Rather, government should be thinking about how education can be made progressively free, dramatically easing the burden on students by eliminating tuition fees. This would require immediate bold steps, not endless task teams. Even if government doesn’t have the vision to implement free tuition – which it should – it could lower fees dramatically. If government intervened to reduce fees from an average of R15 000 to R5 000, this would represent major progress.

Moreover, the cost of free education would be offset by other economic benefits. Funds used by government to alleviate the burden on poor and middle class families would find their way back into the economy through relative increases in consumption and saving, and concomitant decreases in private debt. Free education could save families as much as R45 000 per year if they have several children in higher education at the same time. Similarly, levels of youth indebtedness would fall dramatically.

Further savings would come from streamlining NSFAS. In his Budget Speech of 2015, Minister Blade Nzimande noted that NSFAS was faced with ‘serious corruption’.66 This is in part because of collusion between university finance departments and students. It is very difficult for NSFAS to know whether information regarding students’ backgrounds is accurate, and with ever-rising fees the incentive to cheat always grows, even for relatively well-off students. This problem would subside under my proposed model, since most of those in need of funding would get it. It would be much easier to spot lying in students who were in the top 10% of income earners, given the schools they are likely to have attended, their residential addresses, and their parental occupations. Not only would students benefit greatly, but NSFAS would become more efficient because its job would become much easier.

Ironically, a report commissioned by Nzimande’s department puts the benefits of free education best: ‘a well-educated population is socially beneficial: graduates tend to earn more and therefore pay more tax; education is a fundamental right; fees discourage low-income students and thus perpetuate inequalities; and student living costs are already beyond the reach of many families, especially when coupled with the costs of foregone incomes.’67

Counterarguments

The main argument against free education is that it ‘benefits the rich’. But this is only a problem if the policy includes rich people. As I have already suggested, there are ways around this. To avert this problem, an assessment of how many students can afford to pay fees is necessary. As we have noted, there are about 400 000 students on NSFAS’s books. Clearly, embarking on any free tuition programme would begin with covering the neediest students first. Dealing with this group could take as long as three years, so that the system of providing free education for the needy could be tried long in advance of any worries of the poor subsidising the rich. And means-testing could be done at the highest end of the income spectrum relatively easily given the availability of the evidence. Essentially, the problem of benefitting the rich does not arise if we exempt the rich from the programme.

A second counterargument is that higher education is an inherently elitist enterprise, and that other developmental needs are more pressing. The first response is that multiple priorities can be tackled in the South African budget. Demonstrating that free tuition is relatively inexpensive also takes the sting out of the ‘trade-off’ argument. Second, this argument misunderstands the term ‘elite’. It is true that universities benefit a relatively smaller number of people, compared with, for example, the public healthcare system. But universities’ uses are not weighed solely by the absolute number of people they serve. Rather, they are felt through the second and third-order goods that flow from the system. One thousand more doctors is a small number, but the relative benefits to a healthcare system are tremendous. There may be more people in the secondary school system, but universities are where all teachers are trained. The same is true for professions like engineering and law. Further benefits come from scientific knowledge which feeds these fields. And the philosophical and social scientific research that provides policy solutions for social issues is crucial. Therefore, to relegate universities to a position of unimportance because they cater to a relatively small group is wrong-headed, more so when we consider the possibility of opening the doors of learning to the poor.

Another objection is that free education will mean lower quality. But there is a difference between free education and unfunded education. Free education in the sense that I use it, really means ‘free for the end user’, and not ‘unfunded’. The question, therefore, is who will fund free education, not whether it will be funded. To universities, if they get the same amount of money, this should make no difference to the quality of the service they provide. Indeed, such an argument also relies on a link between money and quality. This link has been called into question by academic Robert Samuels, who argues that universities often use additional money to increase their prestige instead of improving students’ educational experience.68

A final concern worth considering is the effect that state-funded free tuition would have on university autonomy. This concern is a real one. It is possible that if the state bears a larger burden of funding, it could abuse this position to dampen critique and force universities to abide by its will. While this concern is serious, it is also crucial to realise that the state already funds half of the university sector. My view is that the definite benefits that free education would provide outweigh the possible harms of state encroachment. Preventing undue state encroachment would still be possible via the democratic process, or through the courts. And, in some cases, state encroachment might be a good thing, especially when it comes to the question of transformation, or getting universities to focus more on teaching and less on global rankings. Universities could, of course, avoid the problem of state bias by raising more of their own funding. But that may mean that they are held hostage by donors. State power may be a lesser evil in this regard, particularly in the democratic context.

Conclusion

In the debate over free education, what is frustrating is not that there are two sides at loggerheads, it is that there is so little real appetite for change. Most people with the ability to make education free write it off without even giving the idea a chance. This is exactly the problem in our political landscape today: whatever a handful of commentators and the ANC agree on becomes gospel, and anyone with an alternate view is imagined to be a hopeless idealist who doesn’t understand the details. But the status quo is, in fact, what is unsustainable. Rising debt levels, poor throughput, chronic unrest, and skyrocketing fees are the hallmarks of a failed policy.

In the case of free education, as in so many others, we need the bravery to imagine a policy that focuses on the poorest and most vulnerable in our society. Free tuition would put thousands of rands into the pockets of poor families, and prevent new graduate professionals from having to live lives of debt and financial exclusion. This also relates to race: not only does black tax affect new graduates because of the need to support extended families; it is also worsened by policies that imagine we can overcome inequality through debt. The so-called ‘black middle class’ is really just the ‘black indebted class’, whose freedoms continue to be hampered by an economic worldview that sentences them to decades of privation.

What we must do in South Africa is have the guts to experiment. The old model has been tried for long enough. There may be kinks in the chain, and problems down the road, but the need for change – real change – has never been more apparent. We either trust the status quo and lose the long game, or act decisively despite the short-term uncertainty. Instead of fearing the worst, we should imagine the tremendous benefits of expanding access to higher education and, at last, living up to the ideals of the Freedom Charter.