Unity govt must defuse growing student loan time bomb

 

Let’s admit it, we have a serious problem with the long-term survival of the National Higher Education Fund Corporation (PTPTN), with student loan defaulters owing RM6 billion, out of a total of RM39 billion paid out in loans.

Pakatan Harapan, which promised the sun and moon prior to coming into power in 2018, is now in a state of denial as lead partner of the current unity government.

The government’s use of the carrot instead of the stick to secure repayment, by offering discounts now and then, is simply not working. Hardcore defaulters, who number in the hundreds of thousands, have displayed a nonchalant attitude in completely ignoring their legal obligation to repay the taxpayer. It is totally unacceptable.

As of this year, 430,000 borrowers had not paid back a single sen after graduation and obtaining jobs. This is absolutely shocking. The higher education ministry has admitted that the defaulters are affecting PTPTN’s ability to provide more loans. Inevitably, the corporation will have to turn to the government for more funds.

The total amount owed by this group of stubborn defaulters is a whopping RM6 billion. The overall total currently due to PTPTN from an estimated 3.5 million borrowers is about RM39 billion.

Repayment apathy

Some say the situation stinks to high heaven. These defaulters would never dare try doing this to a private financial institution, as they would face serious legal consequences. They know that delays in repaying their car loans will lead to their vehicles being repossessed, and houses auctioned off to repay mortgages.

Malaysians tend to give the lowest priority to settling their loans, whether from government agencies, financial institutions or even friendly borrowings. This attitude has become a sort of culture among the younger Malaysians especially.

To be fair, PTPTN is offering to renegotiate the amounts owed with a complete restructuring plan for those having difficulty in paying. However, many are apparently not taking up this offer.

Take the case of traffic offences. While law-abiding citizens are quick to pay up when issued summonses, some wait for the annual discounts given by the authorities during Merdeka, New Year or festive celebrations. These one-off offers continue unabated despite the unfairness of it all.

PH election promises

Many PTPTN borrowers are in this category, too. Since PH made promises at the 2013 and 2018 elections to reduce the repayment burden, including a possibility of cancelling student loans, many boldly decided to wait for a way out for them. They are still waiting, unfortunately.

Many decided to stop paying as they bought PH’s promises hook, line and sinker. Despite PH being in power from 2018 to 2020 and now with the unity government from 2022, nothing has been done to address the issue.

The fund does not charge any interest, but levies a 1% administration fee. For a RM45,000 loan with a repayment period of 15 years, the interest payable works out to RM30 a month, the loan repayment comes up to only RM280 a month.

That is not too much to ask, to be honest. It is mind-boggling that borrowers who can easily afford this amount in repayment are defaulting. Well, this goes back to their attitude and the Malaysian culture of trying to escape payment at any cost.

The way forward

Sending legal letters to this huge number of borrowers is not the solution. The way forward will be for PTPTN to work with the inland revenue department and employers to recoup the payments where possible.

For those from the B40 households, a longer and easier repayment method could be worked out with consensus of both parties. Some deserving members from this group could even have their loans written off provided they have done well despite their difficult backgrounds.

For example, those who achieve first class honours are currently rewarded with the loan being converted into a scholarship, which means no repayment is required. This may change, depending on the 2025 budget proposals.

Whatever the government does, it should not mollycoddle those who can afford to repay their loans, which could be more than 50% of the borrowers. But it must use caution on those whose careers have not really taken off.

As far as the government is concerned, the people expect promises to be kept. Period. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.