2016/17 Budget & education

The 2016/17 budget was set against the background of slow economic growth, rising government debt, stubbornly high unemployment and the threat of a credit-downgrade of South Africa’s sovereign debt to junk-status. Given this background, it was not surprising that the budget focused on two key themes:

1) Fiscal discipline and

2) The National Development Plan (NDP) as the master plan for tackling the country’s challenges.

Amid the #FeesMustFall campaign and the fine balancing act the budget required, the Minister unsurprisingly gave more money to higher education. The Minister admitted that higher education required more money from government and went on to allocate an additional R16.3 billion to alleviate the fee situation at South African universities. R2.5 billion was allocated to the National Students Financial Aid Scheme (NSFAS) to clear outstanding debt while R8 billion was allocated to students looking to complete their degrees.

Whilst government has increased funding for higher education, the fact is that with the rising number of students attending tertiary institutions, the need is far greater than the resources available to government.  It is estimated that the number of students at tertiary educational institutions will increase from 1 million in 2016/17 to 1.1 million in 2017/18.

What does this mean for parents and guardians of children who will attend tertiary educational institutions in future? Firstly, the NSFAS doesn’t cover the so-called “missing middle�? students. These are students whose parents’ income is more than the NSFAS funding criteria but who earn too little to access loans from banks. Secondly, government despite its best efforts has limited resources.

Read more about money gifts that can make a difference in education.

The solution for parents and guardians is nothing other than the old-fashioned advice: start saving now for tertiary education.

For example, a first year student in 2016 needs about R100,000 for tuition, residence, meals, allowance and books. In 19 years’ time, assuming education costs increase by 10% per year, R2.2 million, in total, will be required to complete a three year degree! A monthly recurring savings of R2750 today, earning 10% per year is required to achieve this goal!

Read more about saving vs investing.