Somewhere in the operations manual of most EdTech lenders and private student finance companies, there is a belief that education credit is broadly exempt from NCA affordability requirements. The belief is not invented from nothing; there genuinely is a statutory exemption. But it is narrow enough that most education credit products do not qualify for it. Operating on a misreading of Section 78 is a compliance position, not a safe harbour.
What people think the exemption says
The common assumption runs like this: education loans are “developmental credit” under the NCA, developmental credit has a special exemption, therefore education lending does not require the full Regulation 23A affordability assessment. The assumption is reinforced by the NSFAS experience: government student loans do not require affordability checks, so the reasoning extends (incorrectly) to private providers doing similar work.
The statutory basis for this assumption is NCA Section 78 read with Section 10(1)(b). Section 78 does create a category of “developmental credit agreements.” And Section 10(1)(b) does exclude certain developmental credit from specific NCA provisions. The problem is in the details of what qualifies and what that exclusion actually covers.
What the NCA actually says: the narrow carve-out
NCA Section 78 defines developmental credit agreements as including, among other things, school loans and student loans. Section 10(1)(b) then specifies that certain obligations under the NCA (including the affordability assessment requirements) do not apply to these agreements.
The critical phrase is in the definitions: a “student loan” in the NCA sense is a credit agreement where the funds are advanced directly to an educational institution for tuition purposes. Not to the student. Not to cover living expenses. Not to purchase equipment. The money goes from lender to institution.
Cliffe Dekker Hofmeyr’s June 2019 analysis addressed this directly: “Section 78 does not provide for a blanket exclusion for developmental credit agreements from affordability assessments … only expressly excludes developmental credit agreements from affordability assessments insofar as they are school loans or student loans.” The exemption is not categorical. It is product-specific and structure-specific.
This matters because almost no private education credit product in practice meets the narrow definition. A personal loan to a student who then pays their own fees is not a student loan under Section 10(1)(b): the money went to the consumer, not the institution. A BNPL product financing an online course is not a student loan; the structure is deferred payment to a commercial provider, not tuition credit to an institution. A bank overdraft used for education expenses is a credit facility with zero developmental credit characteristics.
What falls outside the exemption (and most people don’t know it)
The categories of education-related credit that do not qualify for the Section 78 exemption are broader than most compliance teams assume:
Device loans bundled with a course. A laptop financed alongside an online programming bootcamp is device finance. As covered in more detail in our post on mobile phone contracts and device finance, NCA Section 8(4) captures any transaction where payment for goods is deferred, regardless of the educational context. There is no educational purpose defence for device finance.
Living expense loans to students. Where a lender advances funds to help a student cover accommodation, food, or transport, there is no route to the developmental credit exemption. The credit goes to the consumer and covers non-tuition costs. Full Reg 23A assessment applies.
Loans paid to the consumer who then pays fees. Even where the stated purpose is tuition, if the credit is disbursed to the borrower rather than directly to the institution, the NCA does not treat it as a student loan. The disbursement mechanism matters, not just the stated intention.
BNPL course financing. BNPL providers financing online courses from EdTech platforms face their own regulatory classification questions. But they do not qualify for the developmental credit exemption. The course provider is a commercial entity, the “student loan” definition requires an educational institution in the specific sense, and the deferred payment structure may trigger credit provider status under Section 8(1)(c) regardless.
Bank student overdrafts and personal loans for education. A student who takes out a personal loan and uses it for fees, or who uses an overdraft facility, is a borrower like any other. The credit provider has the full Section 81 assessment obligation and must conduct a Reg 23A-compliant affordability check.
The NSFAS distinction that muddies the water
NSFAS (the National Student Financial Aid Scheme) is exempt from the NCA, but the legal basis is entirely different from the Section 78 developmental credit exemption. NSFAS is a government entity making government loans under the Higher Education Act framework. The NCA simply does not apply to government credit in the same way it applies to private credit providers.
The NSFAS exemption is not a template that private EdTech lenders can point to. It is a function of NSFAS being a statutory body operating under a different legislative mandate. A private company financing student tuition, regardless of how noble the purpose, is a credit provider subject to the NCR’s registration and compliance requirements once the relevant thresholds are met.
This confusion is understandable. NSFAS has shaped the political and cultural understanding of student finance in SA: government-funded, needs-based, no affordability screening. The private sector operates on completely different rules, but the sector’s understanding of those rules has been influenced by the NSFAS model in ways that create genuine compliance risk.
The August 2025 amendments: tightening the expense norms for education lenders
The DTIC published draft amendments to Regulation 23A in August 2025, with a comment deadline of 13 September 2025 and promulgation expected in 2026. The headline change relevant to education credit providers is the proposed sub-regulation 23A(10): mandatory minimum household expense norms by income band.
Under the current framework, credit providers conduct expense assessments but have some discretion in what figures they apply, particularly for younger borrowers or students with limited documented living expenses. The proposed amendments remove that discretion for the floor. If a consumer declares living expenses of R1,200 per month but the mandatory minimum norm for their income band is R3,500, the lender must apply R3,500 regardless of the consumer’s declaration.
For EdTech lenders who have historically used low expense estimates to justify extending credit to students on modest incomes (reasoning that a student’s expenses are low), the amended regulation tightens the methodology significantly. The combination of applying mandatory expense floors and properly accounting for all monthly obligations (including other credit the student holds) will produce lower discretionary income figures and consequently lower credit limits for the same income level.
It is worth noting that the current Regulation 23A income verification requirements are unchanged in the draft: payslips, three months of bank statements, or income statements remain the acceptable verification documents. For students in formal employment alongside study, payslips may be available. For full-time students with part-time or irregular income, bank statements become the primary verification instrument, feeding directly into the affordability calculation under Reg 23A.
Practical compliance for education credit providers
The compliance question has two starting points. First: does your product actually qualify for the developmental credit exemption? The test is strict. Funds disbursed directly to a recognised educational institution for tuition purposes, under an agreement that meets the NCA’s school loan or student loan definition. If any element is missing (consumer receives the funds, purpose is equipment, institution is not recognised, product has an interest component that triggers credit provider status), the exemption does not apply.
Second, if the product does not qualify, the full Regulation 23A assessment is required: income verification from payslips or three months of bank statements, enumeration of all monthly obligations (including those not on bureau, because monthly submission cycles mean recent credit may not yet appear), application of expense norms, calculation of discretionary income, and a documented affordability record retained in accordance with Reg 18/19.
Device finance bundled with education products deserves specific attention. There is no route around full NCA compliance for equipment. A laptop loan is a credit agreement. A tablet bundled into a training package is a credit agreement. The educational context does not change the structure, and the structure determines the regulatory classification.
For lenders who have been operating under the assumption that their education product qualifies for an exemption it doesn’t actually qualify for, the priority is gap assessment: identify which products are structured to meet the narrow Section 10(1)(b) criteria (if any), which are not, and implement Reg 23A-compliant processes for those that require it before an NCR finding does it for you. AffyScore provides the income verification, obligation enumeration, and documented affordability output that satisfies the assessment record requirement: the compliance infrastructure for lenders whose education credit products sit outside the narrow exemption.
