Creating Anwar’s legacy — free degree courses

 Reform of PTPTN pays for itself by ending the debt subsidies; it is far better for the government to give free higher education than to waste money subsidising the failing system.

The mounting burden of education loans provider PTPTN is well-known.

Apart from a repayment problem and a systemic default risk that is costing taxpayers billions, it is also a political risk as younger voters become frustrated with high debt and low-paying jobs.

According to the auditor-general, the PTPTN still had outstanding debts of RM43.7 billion in 2023, of which RM41.1 billion were borrowings.

Cumulatively, it has disbursed RM71 billion in loans since it was established in 1997, and RM32 billion of that has yet to be repaid, according to the higher education minister.

Repayment remains sluggish, with only RM3.56 billion of the RM10.85 billion in arears recovered by December 2023, leading to an increase in loan arrears to RM11.32 billion by September 2024.

Calls to get tough with PTPTN borrowers ring hollow when they represent three million voters, each with family members ready to switch their allegiance at the next election.

Already 1.25 million defaulters have been referred to the Central Credit Reference Information System (CCRIS).

PTPTN has taken more positive steps to improve repayments through the “myPTPTNAnytime, Anywhere!” campaign from January to March this year. By February around 2.5 million borrowers had made repayments with more than a million having paid all outstanding amounts.

Despite these efforts 383,637 borrowers who collectively owe RM5.25 billion have paid nothing at all. Only 585,638 are repaying consistently while another 817,872 are inconsistent with their repayments, leaving arrears of RM5.8 billion still outstanding.

In addition to this ongoing repayment problem, PTPTN has systemic distortionary effects. In the labour market students are forced into low-paying jobs or under-employment because of the high levels of indebtedness.

To repay the loans, students often choose job-focused courses expecting high salaries after graduation but find themselves unemployed because the jobs available do not require their qualifications.

Delayed social development is also a problem. Many are delaying marriage, starting a family, buying a house or starting a business due to high debt.

Higher early-life debt leads to lower mid-life net-worth and high repayments lead to lower savings for retirement, adding to the pension crisis. Better to put RM100 per month into EPF than PTPTN.

For universities, since students depend on PTPTN loans there is an upper cap on potential tuition fees, this revenue keeps going down, holding back good universities and propping up bad ones especially in the private sector.

Free degree courses solve many of these problems and more, and the cost is not as eye-watering as people often think.

If the government pays a RM10,000 annual tuition grant to each Malaysian undergraduate it would have cost RM1.97 billion for the 196,647 enrolled in private universities in 2023 and RM3.28 billion for the 328,047 enrolled in public universities in the same year.

This is only RM5.25 billion but since the public university students already get subsidised tuition it is really the students pursuing private education with higher fees and PTPTN loans that are the concern.

So now let me address the “we can’t afford it” trope. The Auditor-General reported that the government paid RM9.63 billion from 2019 to 2023 in subsidising PTPTN debt financing costs, discounts and exemptions. This annual RM1.93 billion waste could have paid all of the costs of the private degree students over that period.

In other words it would have been better for the government to give free higher education than to waste money subsidising the failing student loan system.

Normally I would drone on about taxes and the Malaysian Superfund but in this case there is no need — reform of PTPTN pays for itself by ending the subsidy to finance the loans. If Sarawak can do it so can the federal government. - FMT

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