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The state will then purchase these loans (or guarantee them) and SARS will be responsible for collection as if they were any other tax.It is understood that government will therefore also be responsible for the shortfall should students not repay these loans.Free higher education for poor and working-class students will be introduced for first-year students in 2018 and fully phased in over five years‚ President Jacob Zuma announced on Saturday.Zuma has revised the definition of poor and working-class students to “currently enrolled TVET (technical and vocational education and training) colleges or university students from South African households with a combined annual income of up to R350‚000”.To this end, the commission recommended that a new cost-sharing model be introduced between the public and private sectors, which would take the form of an income contingent loan (ICL) made available by the private sector (banks) for the full cost of study.Effectively this means that students will only be liable for loan repayments after they have begun working and their income meets a determined threshold.This includes long unclaimed pension fund benefits which would be subject to further guarantees of repayment should they be claimed at a later date.Other proposals include the use of BBBEE points as funding, as well as the creation of an education fund funded by the private sector.
Following a recommendation by a commission on higher education funding, Zuma said the government will increase subsidies to universities to 1 percent of gross domestic product over the next five years from nearly 0.7 percent at present.
It is only when higher education and training is accessible to our youth that our country can abruptly disrupt this vicious cycle.
"Over 70% of South African households earn below the taxable income.
Should this ICL scheme go ahead, the commission said it would reduce a significant burden in the financing of student education, the benefits of which could then be used to provide subsidies.
The full summary of the report’s findings can be found here.