PTPTN in Budget 2019, a progressive move

NOVEMBER 8 — Student loan debt is a global phenomenon and a key concern underlying the domestic socio-economy.

Prior to the Malaysian General Election-14 (GE14), the Pakatan Harapan (PH) coalition has given a promise to defer the study loan repayment for those earning less than RM4,000 per month. Such promise was exercised by PH right after they took over the Putrajaya.

In July, Wan Saiful, Parti Peribumi candidate in Pendang seat, was appointed the new chairman of National Higher Education Fund Corporation (PTPTN). Bold and decisive reforms of the fund corporation are expected with the appointment of a former right-wing think-tanker.

As expected, we witnessed the amends of PTPTN in the country annual budget presented by first-term Finance Minister Lim Guan Eng last week at the lower house.

Obviously, the promises of loan deferment by the Pakatan are broken. However, I opined that the Budget 2019 provides far-sighted strategies to ensure the PTPTN is sustainable to continue to borrow.

There are two significant topical reforms. Firstly, imposing a progressive loan repayment schedule with a percentage ranging from 2 per cent to 15 per cent of the borrowers’ monthly income depending on their income level. Secondly, discounts on the loan will only be given to students from B40 households who have successfully obtained first class honours in their studies instead of waiving the full loan to all first-class recipients.

Such strategies are imperative for reforming the unsustainable fund corporation.

In fact, PTPTN is operating on a model of “revolving fund.” This means that the government will allocate the initial funds in advance, and the PTPTN will lend it to the students, and the loans will only be collected from the debtors six months after the borrower’s graduation ceremony.

In the normal circumstances, borrowers have sufficient grace period to get a job and plan well to fulfil the commitment of debt.

Low repayments, weak databases, discounts and waiving the loans are corrosive bacteria that cause PTPTN scheme to become unsustainable as well as accumulate high debts.

In addition, the weak regulations under the previous ruling had given the impressions to borrowers that the study loan is just some easy money for them to spend extra which doesn’t require to pay back.

Therefore, the idea of mandatory repayment is good. By implementing it, deduction as low as RM20 will be imposed on those who earning RM1,000 per month (a minimum calculation).

It’s not burdensome for fulfilling the obligation of a repayment but indeed a good leap for the PTPTN to reform.

Nonetheless, determination of the repayment rate of distinct income levels must be studied and reviewed precisely by considering the phenomenon of urban poverty.

On the other hand, the progressiveness of past policy which granted loan waiver to all sorts of borrowers without investigating their financial background is questionable.

Various studies conducted overseas shown that students from the middle and upper classes tend to achieve better academic performances due to their socio-economic status. It can be inferred that middle-upper classes are disproportionately represented among first-class honours recipients under the past policy. Such groups are the main benefactors.

As such, it creates disparity as well as social injustice between the middle-upper classes and the bottom classes.

Malaysian need to look at a macro level. It is important to ensure the sustainability of PTPTN as it plays the role of providing funds to allow our human capital been educated and trained to catch the train of next industrial revolution.

There will be another form of disaster if we failed to ensure the standard as well as the supply of our human capital to labour market as it will impact the growth of SMEs, regional development and foreign direct investment.

* Lim Pau Hua is a research analyst at ASLI’s Centre for Public Policy Studies, a think-tank.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.