BY Puteri Sabira

The thorny issue of the non-repayment of National Higher Education Fund Corporation (PTPTN) loans is one that has been debated almost seemingly without end. With more than RM5.4 billion in arrears from 662,000 borrowers, the sustainability of the PTPTN loan is called into question.

A government agency set up in November, 1997, the PTPTN gives out loans to students for tertiary education, but repayment has fallen desperately short.

It was reported that until December 2015, PTPTN only managed to collect RM8 billion, less than their target which was RM15 billion from the RM56 billion loans disbursed.

A previous report on the non-repayment of PTPTN loans showed that the problem is worse than expected.

Higher Education Deputy Minister Dr Mary Yap was quoted as saying that 97% of borrowers who graduated over the past two years have been listed in the Central Credit Reference Information System (CCRIS) for failing to pay off their study loans — a move which the government had imposed to compel borrowers to repay the loan.

“Around 730,000 borrowers finished their studies between 2014 and 2016. However, 701,895 of them are now listed in CCRIS for not repaying their loans,” she reportedly said.

Even with the threat of being blacklisted by CCRIS looming over their heads, many graduates still do not meet their monthly repayments, and this does not bode well for the sustainability of a fund which gives a chance for millions of young Malaysians to pursue higher education.

As the threat of punishment did not seem the work, the government switched to rewarding borrowers instead — in the Budget 2017, Prime Minister Najib Abdul Razak had increased the discount given to borrowers to repay their loans earlier, a move that is meant to encourage repayment. In addition, students who graduate with first-class degrees are already exempt from repaying the loan.

However, these discounts and exemptions may not be the best way forward for PTPTN to get their money back, so to speak.

Exemptions, discounts, may not be the best way forward

At a forum in Kuala Lumpur organised by think-tank, Penang Institute, Penang Institute in KL general manager Dr Ong Kian Ming said the reasons often cited by borrowers for failing to repay the loan are low salaries, the high cost of living, as well as the complicated procedures imposed by PTPTN.

The forum was held to discuss the findings of a research paper titled: “The sustainability of the PTPTN loan scheme”.

At the forum, Ong said offering a discount on the total amount owed for borrowers who paid their loans early would primarily benefit the high-income families.

“In my opinion, the move to exempt first-class graduates from repaying their loan is the main stumbling block for PTPTN to sustain its financial stability,” he said.

Moreover, based on Ong’s observations, first-class graduates usually earn higher starting salaries.

Hence, that would not exactly help the ones that are not able to pay their loans back.

He also pointed out that PTPTN had spent RM360.7 million on early payment discounts between 2012 to 2015.

“I would say this is not a progressive policy, considering PTPTN’s funding problems and the losses it was making year after year,” he said.

Ong, who is also Serdang MP said, one way to address the problem of non-repayment could be to remove the discounts and exemptions.

“In my observation, research from other countries show that students from higher-income groups are more likely to graduate with first-class degrees,” he said.

The 44-page report cited several research papers which show a link between education achievements and income levels, performance — it was found that that students from the middle and upper classes tend to be over represented among the students who obtain first class honours, be it in the public or private universities.

Various studies conducted in other countries have also shown a link between university performance and the student’s socio-economic status, the report further found.

Ong cited it is unsurprising that many youth are unable to make their PTPTN loan repayments, as the students were struggling to make their ends meet due to the high cost of living.

Previously, it was reported that some 400,000 people are unemployed in the country, of which 161,000 graduates or 8.8 per cent are youth, aged between 20 and 24.

Need to strategise loan repayment scheme

The government needs to strategise its plan to ensure the students are able to afford to make repayments for their loans. One way to address the dilemma, Ong said is to introduce a minimum income threshold for repayment.

“A more flexible loan repayment scheme should be utilised such as an income-contingent repayment scheme,” Ong said.

He said, borrowers who earn below RM3,500 may be given temporary relief from repayment until they reach the minimum income threshold.

The scheme would uplift the student’s burden, and it would also reduce the repayment period as borrowers would require to pay more as their careers progressed.

He also suggested that an automatic deduction system similar to the Employees Provident Fund, which is deducted from an individuals monthly salary.

This suggestion is part of several which the research paper proposes as the way forward to ensure the PTPTN’s sustainability.

Among the other suggestions put forth in the paper include also the need to conduct a comprehensive survey of PTPTN loan holders to accurately pinpoint the reasons for the low repayment rate.

The survey could collect data on the financial patterns of fresh graduates, such as the distribution of starting salaries, the type of jobs held vis-à- vis qualifications, other loan obligations besides PTPTN, daily and monthly expenses such as rent and other types of expenditure.

“A 2015 survey commissioned by PTPTN involved a very small sample of 200 respondents and did not include crucial information such as starting salary, type of course and the type of institution,” the paper wrote.

One other crucial suggestion is in the means-testing of PTPTN loans.

Currently, the loan amount that a student can borrow from PTPTN is based on his or her family income.

Students with parents who earn RM20,000 a month are still eligible for a loan, as are students with parents who earn RM2,000 a month — there should be a threshold that those above a certain monthly income should not be able to take a loan.

The research paper also suggested that some of the burden of student loans be shifted to the private sector, where the government can provide a loan guarantee similiar to the My First Home financing scheme.

Overall, however, the higher education sector too, must undergo reform —for example, the government envisions a rapid expansion in the number of students in higher education institutions but it has given little thought as to how these students will fund themselves, and the likely impact of this increase on demand for PTPTN loans.

An attempt to address PTPTN’s underlying problems should incorporate a fundamental review of the current Higher Education Blueprint, including re-examining the balance between IPTA and IPTS students, their respective funding models and assessing the quality of these higher education institutions.

Clearly the problem plaguing the PTPTN loan scheme is one that is a ticking time bomb, and there needs to be serious and committed approaches to resolving it. – The Rocket