In 2009, the South African Department of Education extended tuition fee abolition to schools serving the poorest 60% of students, increased from 40% in 2007. This policy intends to increase access to and longevity in school for the poorest households by removing fees as a barrier and replacing private revenue with increased state funds. Despite this progressive expansion of fee-free schooling, the reported frequency of non-attendance attributable to school fees increased from 2008 to 2009, particularly among poor females and primary-aged children. This paper attempts to explain this phenomenon by presenting three constraints that hamper the potential benefits of fee abolition: (1) the rationalization of educational expenditures; (2) perverse incentives for schools to exclude non-paying children; and (3) the poor targeting mechanisms of fee abolition and government spending. As a result, we find significant lags in the implementation of fee elimination and that many poor households are still required to pay user fees. Several finance policy options are recommended for the South African schooling system. Data originate from South Africa's National Treasury and General Household Survey. (Contains 3 figures, 6 tables, and 22 notes.)