The ministerial task team estimates it would cost R42 billion to fund the poor and "missing middle" university students in 2018. A pilot project to fund students will start next year.
This is in the report of the Ministerial Task Team (MTT) asked to develop a support and funding model for students.
An 18-page executive summary of the report has now been released for public comment, with a deadline for comment of 31 January.
"The MTT is currently in discussions with National Treasury about the broad costing requirements to fund the full cost of study for the very poor, poor and the 'missing middle'. If the average household income of R600,000 is used to define the cut-off for the missing middle, approximately 65 percent of students (the very poor, poor and missing middle students) in the South African university system will be funded," said the report.
"This will require approximately R42 billion per annum, escalating annually into the future in line with university fees and other costs of study increments. The estimated R42 billion will fund just over half a million very poor, poor and missing middle students in 2018."
The team recommended that all very poor students get free higher education, particularly those from households surviving on social grants, while those from slightly better off families get a combination of grants and loans to cover the full cost of study, with family contributions increasing according to means.
Blueprints drawn up
The team drew up a blueprint for a new Ikusasa Student Financial Aid Programme (ISFAP), which would work closely with the existing National Student Financial Aid Scheme (NSFAS).
While NSFAS relies almost entirely on the state for funds and focuses on students from families with an income of below R122,000 a year, the new ISFAP plans public-private partnerships for funding and aims to help students from families with income of below R600,000 a year.
The ISFAP arrangement would set up a special purpose vehicle to run a public-private partnership with NSFAS, aimed at raising funds from the private sector. Tax law would be updated so that donations to this new vehicle would be exempt from donations tax. The team also wants the new vehicle to be designated as a black economic empowerment (BEE) facilitator, to help it raise debt as business donors could get BEE points.
They want private institutional funding, which means investment by pension funds, unit trusts, life office policy holders and banks, and said that enticing private funding might require government guarantees and sharing of risk capital.
The team plans a pilot project on the proposed scheme in 2017.
The public-private partnership has been registered with Treasury and an office set up with Sizwe Nxasana, who chaired the fees inquiry, as the project officer.
The pilot project will involve at least 1,000 first-year students spread across seven universities and one college, with the full cost of study including "wrap-around" support covered. About a third of those will be medical students, another third engineering students and the rest in other scarce skills qualifications like actuaries, chartered accountants and artisans.
The eight institutions are the universities of Venda, Walter Sisulu, Witwatersrand, Cape Town, Pretoria, KwaZulu-Natal and Tshwane, and the college is Orbit Technical college.
The MTT fees inquiry was set up in April, tasked with developing a funding model for poor and "missing middle" students. The "missing middle" students are those whose families are too well-off to qualify for subsidies but not well-off enough to afford university fees.