22 October 2015
A wave of protests has swept across the country with the #FeesMustFall campaigning gaining momentum and strength at a number of tertiary institutions in South Africa. The protests started at Wits where students demonstrated against the proposed 10.5% fee increase for 2016. Other universities had announced similar increases for next year.
“South Africa already has a poor savings culture, but this is perpetuated by young people getting into debt to pay for their studies, before they are employed. The underlying stress at the moment is that these students’ financial health is extremely poor,” noted Ian Wason CEO of DebtBusters, South Africa’s largest debt counsellor.
He added: “Government subsidies have decreased, yet the cost of living has increased. People are struggling to afford food and in some cases are taking on debt to do so. An increase of 10% in tuition fees is excessive and above the current rate of inflation. Students are already struggling to meet the costs associated with higher education, such a large increase will make it even more unattainable for many.”
The reality of the cost of higher education means that many students are in debt before they are employed and have a means of paying it off. DebtBusters’ latest Debtometer revealed an increase in the number of people under the age of 25 who are struggling with debt. The number has increased from 10% of its clients in 2012 to 26% in 2015.
And it is not just the initial cost of the loan that is an expense to students and their families, but the interest charged and the time it will take to pay back the loan as well. Students are also required to apply for a new loan for each year of study, with the application requiring proof of registration from the university and the cost of study for the year.
The cost of a general undergraduate humanities degree at university can cost between about R30 000 and R35 000 for a single year in 2015, depending on the institution that you choose. A private institution may charge more. With an increase of 10%, that would be between R33 000 and R38 500 for 2016.
In addition to this increase, there would be the increased interest charged on a higher loan amount. If a student is being charged 9.5% interest (the current prime lending rate), on a loan of R35 000, that would equate to R38 325 if the loan was paid off in one year. As interest is charged on an annual basis the interest would accumulate the longer you take to pay back the loan.
“In order to improve the debt crisis in South Africa, the issue of people getting into debt so young needs to be addressed. Students need to be made aware of the implications of taking out a loan and how the repayment process works. More needs to be done in order to make education more attainable and affordable, while also allowing the institutions to generate the income that they need in order to offer students the range of academic and social services that students want and expect,” concluded Wason.