How to abolish student loans

 The universal economic policies needed to win the next general election were aired at the Pakatan Harapan conventions over the weekend but meat on the bones is necessary now.

With the Pakatan Harapan convention season behind us some interesting ideas emerged in line with the need for attractive, universal policies ahead of the next general election (GE16).

A proposal by PKR Youth chief Kamil Munim for the government to write off PTPTN debts for hardcore poor and low-income borrowers caught my eye, which could easily be converted to a scheme to abolish student loans altogether in three easy steps.

The first stage is to stop issuing new debt. This means replacing PTPTN loans with a fixed grant which could be in the form of a voucher used by students to “shop around” for their preferred degree programme at whichever university they want.

This maintains a marketplace in which universities would still need to compete to offer relevant programmes based on quality and student experience rather than price.

Those universities, whether public or private, that feel they offer a premium programme could top-up the fees above the voucher price. Others could simply offer basic programmes at the voucher fee and attract students using value indicators based on student experience or outcomes.

In my experience, private universities would welcome this because it would at least give them a steady, guaranteed source of income and it would reduce the marketing costs and discounts disguised as “scholarships” that weigh them down each semester to reach recruitment targets.

The second stage would focus on PTPTN borrowers. Those who have paid their PTPTN loans would be left in peace.

Those with outstanding loans could be offered options to clear their accounts or pay through regular, mandatory salary deductions which would end the moment their accounts were cleared.

This is a form of graduate tax and could be made progressive by having tiered deductions based on salary levels. Those in target groups who make a big social contribution, such as teachers or nurses, could even be exempted altogether.

The third stage is to finance the PTPTN grants. PTPTN disburses RM3 billion to RM3.5 billion per year in total loan disbursements to cover tuition fees and living allowances for students in public and private higher education institutions. This is equivalent to less than one percent of federal government operational expenditure or the price of one month of petrol subsidy.

In fact, the net cost would be much less than this because the government already subsidises the interest payments on PTPTN loans to the tune of at least RM1 billion per year and bails out the system periodically when repayments fall short.

In addition, the PTPTN eKasih free education scheme, the first-class student fee waiver and funding for science, technology and mathematics (STEM) add almost RM800 million to higher education subsidies already available.

So, within the current spending plans, perhaps as early as Budget 2027 in October, the government can already abolish student loans and pay for free higher education directly.

PTPTN could administer it and continue with its Simpan SSPN (Skim Simpanan Pendidikan Nasional).

As of Dec 31, 2025, this scheme had accumulated around RM24 billion in deposits across millions of accounts, backed by a recent 4.1% annual dividend payout totalling RM506 million.

This transforms PTPTN into a new form of national higher education trust fund. It gives PTPTN a positive new role in funding the higher education ecosystem in the future in line with its original mandate.

Unless the unity government takes the opportunity to do this now in Budget 2027, some bright young party will offer this transformative, progressive, universal policy to all Malaysians at the next election and capture the millions of votes from current and future students and their families which are just waiting to be mopped up. - FMT

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