A LEGAL ANALYSIS OF NATIONAL STUDENT FINANCIAL AID SCHEME (NSFAS)  MISMANAGEMENT

Abstract

This article presents a legal analysis of alleged maladministration, financial misconduct, and fraud within the National Student Financial Aid Scheme (NSFAS) in South Africa. Under section 29(1)(b) of the Constitution, the State is duty-bound to make further education progressively available and accessible through reasonable measures.[1] We examine how NSFAS was established via legislation — the National Student Financial Aid Scheme Act — to give practical effect to the constitutional right to education.[2] The central issue is the alarming misallocation of funds: investigations by the Special Investigating Unit (SIU) revealed that over R5 billion was possibly awarded to more than 40,000 students who did not qualify under the scheme’s means test.[3] The main argument of this article is that these corrupt practices not only breach public finance norms but also undermine the constitutional commitment to socio-economic rights, particularly the right to further education under section 29 of the Constitution.[4] Moreover, the lack of independent oversight and accountability violates the principle established in Glenister v President of the Republic of South Africa[5] that the State must maintain robust, corruption-resistant institutions. This article calls for urgent legal and institutional reforms within NSFAS: strengthening financial controls, improving governance transparency, enhancing verification mechanisms for beneficiaries, and reinforcing independent anti-corruption structures.

I. Introduction

The National Student Financial Aid Scheme (NSFAS) is a cornerstone of South Africa’s tertiary education funding system. Established in 1999, it was built on the earlier Tertiary Education Fund of South Africa to become a statutory body that administers student financial support.[6] NSFAS exists to break down the financial barriers that would otherwise keep many young South Africans out of higher education.

Yet, behind its transformative mission lies a troubling pattern: allegations of mismanagement, weak financial controls, and corruption. Investigations by the Special Investigating Unit (SIU) have revealed systematic failures and billions of rands that may have ended up in the wrong hands.[7] In this article, we examine how these problems emerged, who is affected, and what reforms might restore NSFAS’s credibility and social purpose.

Corruption and mismanagement within NSFAS have escalated into a full-blown governance crisis, raising fundamental questions about fairness, accountability, and the State’s commitment to social justice.[8] The central theme of this article is how public funds meant to empower vulnerable students are being misused through systemic failures and corruption.

The issue is of critical importance because NSFAS is not just another state agency; it embodies the State’s constitutional obligation to facilitate access to higher education. Mismanagement undermines not only taxpayers’ money but also the very social contract that seeks to transform inequalities in South Africa. In failing to implement sound reconciliation processes and internal controls, NSFAS has allowed both overpayments and underpayments to institutions — a pattern confirmed in SIU findings.[9]

Furthermore, the fallout from such corruption is not merely technical; it carries profound consequences. Deserving students may be inadvertently excluded, while ineligible beneficiaries drain scarce resources. This article argues that corruption within NSFAS constitutes a serious legal and constitutional crisis: it denies students the education to which they are entitled under section 29 of the Constitution, it reflects a failure of fiduciary duty by those entrusted with public funds, and it demands urgent legislative intervention to ensure proper oversight, accountability, and the fulfilment of NSFAS’s mandate to redress inequality.

II. Legal and Policy Framework Governing NSFAS

Constitutional Foundation: Right to Education
The constitutional anchor for student funding in South Africa is the Constitution of the Republic of South Africa, 1996. Section 29(1)(b) guarantees that everyone has the right to further education, which the State, through reasonable measures, must make progressively available and accessible.[10] This guarantee imposes a positive obligation on the State to take reasonable measures to facilitate access to tertiary and further education. The right is not absolute in the sense of unlimited resources, but the State must act within a framework of progressive realisation and reasonableness.[11]

Given South Africa’s history of educational inequality and exclusion, section 29, as part of the Bill of Rights, is widely understood as central to redressing past injustices and promoting social transformation through access to higher education. Any mechanism that distributes public funds for higher education — such as NSFAS — flows directly from these constitutional commitments.

Statutory Basis: The NSFAS Act
The legal foundation of NSFAS is the National Student Financial Aid Scheme Act 56 of 1999 (NSFAS Act). The Act establishes NSFAS as a juristic person under section 3, charged with administering student financial aid.[12] The Act’s purpose is to explicitly provide financial aid to eligible students at public higher education institutions and public colleges.[13] According to the Act, NSFAS is responsible for key functions including allocating funds for loans and bursaries, determining eligibility criteria in consultation with the Minister, managing and administering the scheme, and recovering loans.[14] The NSFAS Act operationalises the constitutional right, translating section 29’s promise into a concrete funding mechanism.

Public Finance Oversight: PFMA and Governance Requirements
Because NSFAS is a public entity, it is subject to the Public Finance Management Act 1 of 1999 (PFMA). NSFAS is listed as a Schedule 3A national public entity under the PFMA.[15] Under the PFMA, public entities have strict obligations regarding financial management, accounting, reporting, and the safeguarding of state resources.[16] The governance framework requires NSFAS to maintain a board, including a board executive committee intended to provide fiduciary oversight, accountability, and protection of the financial interests of the State.[17] In addition, NSFAS may recover loans, maintain databases, and raise funds; it is also subject to the National Credit Act 34 of 2005 (NCA) when functioning as a credit provider.[18]

Juridical Recognition and Limits: Case Law
A recent landmark case is National Student Financial Aid Scheme v Moloi and Others (574/2022), decided by the Supreme Court of Appeal (SCA) in 2024. The court considered the legality of NSFAS’s decision to exclude funding for a second LLB degree. The court held that the determination and revision of eligibility criteria constituted lawful executive action under the NSFAS Act, and that the decision was rationally connected to the purpose for which the power was conferred — namely, to assist poor and working-class students in obtaining their first undergraduate qualification.[19]

The court emphasised that the limitation on funding, though negatively impacting some students, was consistent with the State’s obligations under section 29(1)(b), because the right to further education is subject to resource constraints and must be balanced through reasonable measures.[20] The Moloi judgment illustrates critical principles: the State has discretion under the right to education, and this discretion must be exercised within constitutional and statutory bounds, rationally and fairly.[21] This ruling underscores the delicate balance between resource allocation and ensuring access to education — a critical consideration for policymakers and institutions like NSFAS. Even lawful exercises of discretion, including eligibility determinations and exclusions, remain subject to constitutional reasonableness review.

In Minister of Education v Harris,[22] the court held that government education decisions must remain lawful and rational. This supports the argument that NSFAS decisions must be legally justified, transparent, and not arbitrary.

The decision in the Juma Musjid case[23] confirmed the constitutional importance of access to education. Though focused on basic education, it reinforces that funding decisions affecting access must be reasonable and rights-affirming.

Promotion of Administrative Justice Act 3 of 2000 (PAJA)
PAJA protects students from unfair, unreasonable, or procedurally improper administrative decisions. Wrongful defunding, delayed appeals, and unclear communication may amount to administrative injustices cognisable under PAJA.[24]

III. Why Corruption in Student Funding Is a Pressing Legal Issue

Corruption erodes the very foundation of legal order. When public officials abuse their power for private gain, it weakens the rule of law because laws cease to be applied equally and transparently.[25] The Constitutional Court has recognised that corruption is inconsistent with the rule of law and undermines constitutional values such as accountability, human dignity, and the protection of rights. In South Africa, many socio-economic rights depend on state funding. Corruption diverts public resources away from their intended purpose, limiting the State’s ability to fulfil its constitutional obligations.[26]

Corruption also risks destroying public trust in institutions. Legally, when governance structures are perceived as corrupt or biased, the legitimacy of the State and its institutions is called into question.[27] This trust erosion has political and legal consequences: it can destabilize democratic governance, encourage impunity, and weaken the effectiveness of legal and administrative oversight.

Legal reforms in South Africa are underway to strengthen anti-corruption measures. Amendments to the Prevention and Combating of Corrupt Activities Act (PRECCA) and new procurement legislation impose stricter duties on organisations and public bodies to prevent corrupt practices.[28] PRECCA is the principal statute in South Africa for addressing corruption.[29] The existence of this legislation makes clear that corruption is not merely a moral or political problem — it is a crime, and individuals may be held criminally liable. When corruption infiltrates funding bodies like NSFAS, the legal consequences are not abstract; they directly affect the distribution of public resources meant for students.

IV. Evidence of Mismanagement and Corruption at NSFAS

Investigation by the Special Investigating Unit (SIU) and Initial Findings
In April 2023, the SIU reported that over R5 billion of NSFAS funds was possibly allocated to students who did not qualify for funding. The investigation found that more than 40,000 students across 76 higher education institutions benefited irregularly — many from households with income above the scheme’s eligibility threshold, or where the required parental information was not properly provided during the application process.[30]

The root cause, according to the SIU, was weak internal controls at NSFAS and the absence of an annual reconciliation process between funds disbursed to institutions and the actual list of funded, registered students. The lack of reconciliation created opportunities for overpayments, double-dipping, funding of dropouts, and misallocation.[31] The SIU also flagged systemic vulnerabilities including deficient verification mechanisms, flawed IT systems, and poor record-keeping at some institutions, which allowed fraudulent and irregular applications to proceed undetected.[32]

Recoveries, Acknowledgements of Debt, and Institutional Accountability
Since the SIU’s investigations began, there have been successive rounds of fund recoveries from institutions and individuals. By early 2024, the SIU reported recovering R737,926,351, including unallocated funds and signed acknowledgements of debt from some ineligible beneficiaries.[33] Beyond student repayments, multiple higher education institutions and TVET colleges have returned significant sums. For example, the University of Pretoria repaid R400 million in unallocated funds.[34]

As of 2025, the SIU reported recovering approximately R2 billion in overpayments made to universities and TVET colleges on behalf of NSFAS — a sign that improprieties were widespread and not limited to a few isolated cases.[35] Despite these recoveries, the SIU maintains that a significant portion of the R5 billion initially identified remains unaccounted for, raising serious doubts about whether full restitution is feasible.[36] These recoveries confirm that the misallocation was not merely theoretical — funds meant for needy students were disbursed improperly.

V. Critical Analysis: Challenges Students Face as a Result of NSFAS Corruption and Mismanagement

Although NSFAS was created as an equaliser intended to democratise access to higher education for historically marginalised learners, corruption and administrative mismanagement have produced effects that directly undermine students’ welfare, academic progress, and socioeconomic mobility.[37] The consequences are not merely administrative — they are deeply lived, structural, and generational.

Late or Irregular Disbursements: Housing, Allowances, and Basic Needs
The problem of delayed disbursement is well documented. As recently as 2025, NSFAS admitted that allowances and accommodation payments had been delayed due to system faults and batch processing errors, leaving students financially stranded.[38] Because many students depend entirely on NSFAS allowances for rent, food, transportation, and study materials, delays have resulted in real hardship — some students face eviction when landlords stop honouring accommodation contracts in the absence of payments.[39] According to student testimonies in 2025, many had to attend classes and write examinations without receiving any support, and some reportedly lacked funds for food and basic essentials, undermining both their academic performance and overall wellbeing.[40]

Institutional and Accommodation Crisis
Because NSFAS failed to pay many accredited and private accommodation providers on time, landlords threatened evictions and, in some cases, reportedly refused students entry, leaving them without accommodation mid-semester.[41] The delays and uncertainty around accommodation payments have triggered broader instability — not only for students, but also for housing providers, many of whom are small or black-owned businesses, placing the viability of student housing infrastructure under serious threat.[42]

Academic Disruption, Stress, and Exclusion from Studies
Because funding — comprising tuition, allowances, and accommodation — is delayed or sometimes reversed, many students are unable to register on time, thereby delaying and jeopardising their academic year.[43] For returning students, or those dependent on NSFAS across multiple years, repeated defunding and delays erode trust in the system, discourage continuation, and can drive talented but vulnerable students away from tertiary education altogether.[44]

VI. Comparative Analysis: Foreign Jurisdictions and Recent Reforms

United Kingdom Reforms
The United Kingdom has implemented stricter regulations on private providers and franchised courses found to be abusing student loan funding — with issues ranging from fraud to payments made to non-attending students. This prompted tighter provider registration requirements, stronger data-sharing protocols, and enhanced collaboration between loan administrators and law enforcement. The UK’s approach of regulating providers — not just students — offers a useful model for NSFAS, as it would reduce third-party leakages and improve oversight of accommodation and private providers.[45]

Australia’s HELP System Reforms
Australia’s income-contingent loan system, the Higher Education Loan Program (HELP), has undergone significant reforms to improve fairness and sustainability — including caps on indexation, repayment-threshold adjustments, and strengthened repayment administration. Australia’s focus on financial stability and predictable payments, backed by robust data systems, offers a key lesson for NSFAS: the need for clear and sustainable financing models underpinned by reliable technology and data integrity.[46]

VII. Recent Developments and Reforms Concerning NSFAS

NSFAS Board-Approved Six-Point Recovery and Reform Plan
The NSFAS board recently approved six projects aimed at restoring governance. This signals internal recognition of systemic problems and a move toward structural reform.[47]

2025 Emergency Funding Injection to Address Shortfall
In September 2025, NSFAS announced a R13.3 billion funding boost to address a previously reported shortfall. This demonstrates an attempt to avert a funding crisis that threatened student access in 2025.[48]

Proposal from the Leader of the Economic Freedom Fighters (EFF)
Mr. Julius Malema called for direct funding to universities and colleges, rather than channelling money through NSFAS. This proposal was made in a public statement and was reportedly supported by the Minister of Finance, Mr. Enoch Godongwana.

VIII. Recommendations and Reforms to Combat Corruption in NSFAS

Mandatory Reporting
The National Student Financial Aid Scheme Act 56 of 1999 should be amended to include mandatory periodic reporting requirements. NSFAS must publish quarterly or bi-annual reports on allocations, bursaries, allowances, accommodation-provider payments, and recoveries. Transparency of this nature is a foundational prerequisite for meaningful public accountability.

Statutory Right of Appeal
A statutory right of appeal should be introduced for students who have been denied funding, defunded, or subjected to delayed payments by NSFAS. Such a mechanism would enhance both accountability and fairness, ensuring that affected students have a clearly defined legal remedy.

Strengthening of Regulatory Requirements
Regulations under the PFMA must be strengthened to include mandatory internal control systems and audit committees for entities such as NSFAS. Government must enforce stricter financial controls and ensure that funds reach students quickly, directly, and verifiably.

A Student Protection Act
Courts must be more vigilant in protecting students’ rights when the system fails. Further, dedicated legislation — in the form of a Student Protection Act — should be established. No existing statute directly protects students against operational failures, delayed funding, or wrongful defunding caused by corruption within student funding bodies. Such legislation would fill this critical gap and provide enforceable protections for beneficiaries.

IX. Conclusion

Corruption within NSFAS has grown into a serious threat to equal access to higher education in South Africa. While the scheme was created to uplift students from disadvantaged backgrounds, poor governance and fraudulent practices have prevented many learners from receiving the support they deserve. The solution lies in stronger oversight, transparent funding processes, and a legal framework that clearly protects beneficiaries. Parliament must strengthen policies; the judiciary should remain firm in enforcing fairness; and civil society must continue to demand accountability. Through cooperative and sustained reform, NSFAS can be rebuilt into a reliable and just instrument that truly opens the doors of learning to all.

References

[1] Constitution of the Republic of South Africa, 1996, s 29(1)(b).
[2] National Student Financial Aid Scheme Act 56 of 1999 (SA).
[3] Special Investigating Unit, ‘Media Statement: SIU Welcomes Arrest of NSFAS CEO and Others’ (18 April 2023) (link unavailable) accessed 24 November 2025.
[4] Constitution of the Republic of South Africa, 1996, s 29(1).
[5] Glenister v President of the Republic of South Africa 2011 (3) SA 347 (CC).
[6] NSFAS, Annual Report 2018/2019.
[7] Special Investigating Unit, ‘Media Statement: SIU Welcomes Arrest of NSFAS CEO and Others’ (18 April 2023) (link unavailable) accessed 24 November 2025.
[8] ‘NSFAS Crisis: Corruption and Mismanagement Plague Student Aid Scheme’ (2024) South African Daily (link unavailable).
[9] ‘NSFAS Crisis’ (2024) (link unavailable).
[10] Constitution of the Republic of South Africa, 1996, s 29.
[11] Constitution of the Republic of South Africa, 1996, Chapter 2.
[12] National Student Financial Aid Scheme Act 56 of 1999, s 3.
[13] National Student Financial Aid Scheme Act 56 of 1999, s 4.
[14] National Student Financial Aid Scheme Act 56 of 1999, s 4.
[15] National Student Financial Aid Scheme Act 56 of 1999, read with Public Finance Management Act 1 of 1999, Schedule 3A.
[16] Public Finance Management Act 1 of 1999.
[17] National Student Financial Aid Scheme Act 56 of 1999, s 12.
[18] National Credit Act 34 of 2005, ss 2(1), 88.
[19] National Student Financial Aid Scheme v Moloi and Others (574/2022) [2024] ZASCA 66 (3 May 2024).
[20] National Student Financial Aid Scheme v Moloi and Others (574/2022) [2024] ZASCA 66.
[21] National Student Financial Aid Scheme v Moloi and Others (574/2022) [2024] ZASCA 66.
[22] Minister of Education v Harris 2001 (4) SA 127 (CC).
[23] Governing Body of the Juma Musjid Primary School v Essay N.O. 2011 (8) BCLR 761 (CC).
[24] Promotion of Administrative Justice Act 3 of 2000, ss 3–6.
[25] Constitution of the Republic of South Africa, 1996, s 1.
[26] Mubangizi JC, ‘Law, Democracy and Development’ (2012) 16(1) Journal of Law, Democracy and Development 1–12.
[27] Mubangizi JC, ‘Law, Democracy and Development’ (2012) 16(1) Journal of Law, Democracy and Development 5.
[28] SAIGA, ‘Legislative Changes and Proactive Measures to Combat Corruption: Section 34 of PRECCA and the Public Procurement Act 28 of 2024’.
[29] Prevention and Combating of Corrupt Activities Act 12 of 2004 (SA).
[30] Special Investigating Unit, NSFAS Investigation Report (April 2023) paras 3–4.
[31] Special Investigating Unit, NSFAS Investigation Report (April 2023) paras 5–6.
[32] Special Investigating Unit, NSFAS Investigation Report (April 2023) para 2.
[33] Shonisani Tshikalange, ‘SIU Recovers More than R737m in NSFAS Investigation’ Business Day (7 February 2024).
[34] Special Investigating Unit, ‘Media Statement: SIU Welcomes Arrest of NSFAS CEO and Others’ (18 April 2023) (link unavailable) accessed 24 November 2025.
[35] Shonisani Tshikalange, ‘SIU Recovers More than R737m in NSFAS Investigation’ Business Day (7 February 2024) para 8.
[36] ‘SIU Has Recovered More than R2bn in Irregular NSFAS Funds’ African Insider (link unavailable) accessed 25 November 2025.
[37] OUTA, NSFAS Investigation Report (February 2023).
[38] NSFAS, Statement on Delayed Payments (2025).
[39] NSFAS, Statement on Delayed Payments (2025) para 4.
[40] Rapula Moatshe, ‘Students Rally Against NSFAS Funding Delays, Highlighting Financial Hardships’ The Star (published approximately 5 months prior to article date) para 5.
[41] Rapula Moatshe, ‘Students Rally Against NSFAS Funding Delays, Highlighting Financial Hardships’ The Star para 6.
[42] ‘NSFAS Faces Growing Debt Crisis with Student Housing Providers’ Town Press (5 August 2025) para 5.
[43] Rapula Moatshe, ‘Students Rally Against NSFAS Funding Delays, Highlighting Financial Hardships’ The Star para 13.
[44] Human Sciences Research Council, ‘The Impacts of NSFAS Delays on Students’.
[45] ‘UK Government Tightens Oversight of Student Loan Providers’ Financial Times (accessed 25 November 2025).
[46] Australian Universities Accord, dewr.gov.au (4 July 2025).
[47] Jabulile Mbatha, ‘NSFAS Board Approves 6 Projects to Restore Governance, Address Challenges within Scheme’ Eyewitness News (25 August 2025).
[48] ‘NSFAS Announces R13.3 Billion Funding Boost to Address R10.6 Billion Shortfall for 2025–2026’ Central News (18 September 2025) (link unavailable).