The R24 billion debt crisis ruining SA universities

This article was first published by Business Day.Key topics:R24bn owed to universities, 64% of student debt is impairedRising student debt driven by housing costs and NSFAS pressuresUniversities withhold certificates; TVET colleges face extreme bad debt.By Tamar Khan.A growing proportion of South Africa’s soaring student debt to universities is unlikely to be recovered, jeopardising the financial viability of the sector, parliament heard on Wednesday.South Africa’s 26 universities were owed R24bn by end-2024, of which 64% (R15.3bn) was impaired debt. In 2022, bad debt (R11.3bn) constituted 60% of the total R18.8bn owed by students, according to the department of higher education & training.“Student debt is not only a student-support issue; it directly affects the reliability of a major income stream and the cash that institutions can realistically collect,” said the department’s deputy director-general for universities, Thandi Lewin.“Though universities of technology show the highest debt ratios, traditional comprehensive universities are also carrying substantial debt balances — it is a sector-wide issue,” she said..Read more:.Jo-Mangaliso Mdhlela: The incalculable debt SA owes Judge Nugent.“We are particularly worried about the fact that even though we’re investing more and more money as a state in student financial aid, we have massive growth in student debt,” she told parliament’s portfolio committee on higher education.The government’s annual contribution to the National Student Financial Aid Scheme (NSFAS) has grown from R10bn 10 years ago to more than R50.5bn in 2026/27 and will account for 37.2% of the total budget set aside for higher education over the next three years.The daily operations of universities are not immediately threatened, as the institutions have substantial reserves, but this buffer is being squeezed by the growth in student debt, said Lewin. Universities reported net income of R125.4bn in 2024 and a net operating surplus of R16.4bn in 2024.The rising cost of student accommodation is a major contributor to the growth in student debt, said Lewin.“The shortage of affordable student housing, rising private accommodation costs, increasing transport expenses, and delays in NSFAS accommodation payments have compounded the financial burden on students and institutions,” she said.Student debt is also driven by high unemployment among students and their families, accumulated debt spanning multiple academic years, and NSFAS’s decision to cap accommodation allowances, said Universities SA (USAf) CEO Phethiwe Matutu.She presented more recent, but unaudited, figures to the committee that showed debt to universities stands at R59bn, of which almost R12bn is impaired debt. The University of Johannesburg, Cape Peninsula University of Technology, and Durban University of Technology each face student debt of more than R4bn.Universities are withholding certificates for more than 188,000 students with outstanding debts who have completed their studies to persuade them to pay back the money. “It is a measure of last resort,” said Matutu..Read more:.From Oxford University: How influencers are reshaping news media in SA, Nigeria and Kenya.There is a strong association between the scale of university debt and the number of student certificates withheld, she said.The department had sought legal advice on whether withholding student certificates is permissible, said Lewin. The legal opinion acknowledged the hardship facing students but concluded students have a contractual obligation with universities, which have a legitimate right to recover money owed to them, she said.The South African Public Colleges Organisation (Sapco) said its survey of Technical and Vocational Education Training (TVET) colleges found extremely high ratios of bad debt. For example, Capricorn TVET College recorded bad debt of R242m, representing 95% of its total debt.A large proportion of the debt owed to TVET colleges was more than three years old, making recovery increasingly difficult, parliament heard. Weak collection systems, outdated student contact details and ongoing challenges in reconciling records with NSFAS compound the problem, according to Sapco..Read more:.Matric, STEM, and South Africa’s education crisis: Andrew Kenny.Its survey, which included responses from only 30 of South Africa’s 50 TVET colleges, finds the sector is withholding more than 20,000 certificates from students with outstanding debt, some dating back to 2007..This article was first published by Business Day and is republished with permission.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

The R24 billion debt crisis ruining SA universities

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