EPF way to solve unpaid student loans

The student loan corporation PTPTN is owed a total of RM36 billion. (Bernama pic)

PETALING JAYA: After months of seeking public feedback on resolving the issue of unpaid student loans, the “best possible solution” has been found to the RM36 billion PTPTN debt mountain.

The proposed solution, which has yet to be approved, does not provide for a total write-off of all debts owed to the National Higher Education Fund Corporation (PTPTN), as proposed by Pakatan Harapan in its manifesto for the 2018 general election.

However, there will be a partial write-off.

Those earning less than RM2,000 need not repay their loan, while repayments will be collected from other debtors, through deductions from the debtors’ combined monthly EPF contribution from employer and employee.

“It is simply not financially viable to fully execute (a total write-off); doing so will cost the government tens of billions over the next five years,” said an official in the know about the proposed solution.

The official, who asked to remain unnamed, told FMT that the proposed method was to tap into the debtors’ contributions to the Employees Provident Fund, with a two-tier system of repayments for those earning more than RM2,000 a month.

* For those earning between RM2,000 and RM4,000, a deduction of between 2% and 4% will be made from their combined monthly EPF contribution which amounts to 23% of salary.

* A bigger deduction will be made for those earning more than RM4,000 a month. FMT’s source said the National Higher Education Fund Corporation (PTPTN) had proposed setting the cap at 8% instead of 15% as approved by the Cabinet in December.

Debtors could also choose to repay their loans through a combination of EPF deductions and cash.

“We feel this solution is the best way forward because it will not affect the borrower’s cash flow and the PTPTN can still recoup funds to fund future borrowers.”

A previous proposed solution had called for compulsory deductions to be made from the salaries of student debtors. Those earning RM2,000 a month and above, deductions of 2% to 15% will be made from their salaries to repay the loans. Deductions of as much as 15% would be made from the salaries of those earning RM8,000 a month.

FMT’s source said loan defaulters need not fear being placed on a travel blacklist. However, there would be stricter enforcement of loan repayments, including the possibility of legal action. - FMT