Hornbill Unleashed

April 1, 2014

PTPTN education lifeline abused

Pauline Wong

The National Higher Education Fund Corporation (or PTPTN by its Malay acronym) has served as a lifeline for many students seeking tertiary education since it was established in 1997.

The loan is especially helpful for those who are not born with a silver spoon. They rely on the PTPTN loan to take them through university and earn a degree, which is crucial in securing a job and eventually a steady income. In short, the fund is there for them in their hour of need, providing them the opportunity to complete their studies.

However, many treat it as a grant and fail to repay when they graduate, thus depriving others from enjoying the same benefits.

The numbers are staggering. More than 400,000 graduates have not repaid the money they borrowed, and that amounts to RM4.8 billion.

The seriousness of the problem is underscored by the government’s decision to blacklist the defaulters and prevent them from travelling abroad.

As of October last year, more than 45,000 PTPTN defaulters have been blacklisted and prevented from travelling overseas for failing to repay more than RM239.44 million they borrowed from PTPTN.

In the 16 years since it was set up, PTPTN has disbursed RM9.7 billion in study loans to 1,345,894 undergraduates. Of that total, only RM4.87 billion has been repaid so far by 910,746 borrowers, according to Deputy Education Minister Datuk Mary Yap Kai Ching.

This accounts for a repayment rate of just over 60% – very low by any standards. This is in spite of the move to blacklist defaulters.

To date, a total of RM4.8 billion remains outstanding from 435,148 borrowers. This comprises those who have yet to repay even a single sen, and those who have been allowed to repay at lower than normal rates, Yap told a Parliament sitting in October 2013.

Judging by its standard operating procedure in recovering loans, the PTPTN seems to give borrowers a lot of leeway. A borrower receives a notice only after 16 months of failing to make payments. Action is taken to blacklist him only after five notices have been issued and no payment has been received.

In comparison, a person who has a home loan or personal loan from a bank receives his first notice 30 days after failing to meet a payment.

According to Yap, blacklisting an errant borrower remains a last resort, making it even easier to delay payment.

A suggestion to impose drastic measures on defaulters has been resisted.

One proposal was to report defaulters to the Central Credit Reference Information System (CCRIS) or the Credit Tip-Off Service (CTOS). Being blacklisted on CCRIS will make it difficult, if not impossible, for someone to get loans for homes or cars, or to qualify for a credit card.

Detractors of the proposal insist that such a move would unfairly put defaulters at a disadvantage when applying for loans to meet life’s necessities such as housing and transport.

Still, with millions in unpaid debt, the time may have come for action that would compel defaulters to pay up. The fact is that PTPTN is a loan whose interest rate is lower than that charged by commercial banks. A PTPTN borrower pays an interest of only 3% over 20 or more years. A commercial bank charges 10% to 12% for a personal loan. Monthly repayments for PTPTN loans are relatively low – most pay an average of RM200 a month.

Among defaulters, there are those who wilfully refuse to pay and those who genuinely cannot afford the monthly repayments, no matter how low. There are many reasons why so many borrowers default on their loans. Some simply choose not to pay up because they feel they do not earn enough, while others put the blame on the government.

For many, the repayment has become a burden and they now want the government to give discounts.

Are these defaulters just being ungrateful, selfish or irresponsible? One could argue that unless the borrower is in serious financial trouble or is unable to secure a job upon graduation, there is no excuse to not repay and thus deprive others from getting the same benefits they themselves were given. To demand for discounts or waivers would appear selfish.

However, the situation is no longer so cut and dried. Student activist Adam Adli tells The Heat that many borrowers are not able to repay the loans simply because they are not able to get a job.

“As of November last year, the unemployment rate has risen to 3.4%. Along with that comes the rise in inflation rate and price increases. It just gets worse each year. Those who are unemployed or those with low incomes but having to grapple with high cost of living … they don’t have the money to repay the loans,” he says.

He attributes the problem to “unreasonable interest and additional charges” that, he says, is like a noose around the neck. “In such a desperate situation, these are the consequences,” he says.

Adam believes that to overcome the situation, PTPTN must first be clear about its role as a vehicle to help students. “It is not meant to be a profit centre,” he says.

“Now,” he points out, “the loans are converted into scholarships for those who scored good grades when they were in university. How about the poor? PTPTN has the data of all the borrowers so it should know their background. It should change the way it treats graduates.”

This argument seems rational enough, given that many of those who truly need the loans are from the lower-income group.

PTPTN’s current policy is that all graduates must repay their loans, regardless of their current financial state. But, as Adam points out, there are so many of them who remain unemployed, yet are forced to repay the loans.

“How can they service the loans? It is not a small amount. PTPTN needs to be reasonable. There should at least be a mechanism that can separate those who are able and not able to repay, or the employed and unemployed, before asking them to pay,” he says.

Adam, who admits he does not support the PTPTN, wants the fund to be more compassionate towards its borrowers. He is also adamant that education should be free up to tertiary level.

“There must be reasons they refuse to pay. It cannot be denied that there are many out there who believe that education should be sponsored or given free. Some may have refused to pay for those reasons. Maybe the government should look into that seriously,” he adds.

Student loans, he points out, have been identified as one of the main contributors to household and national debt. “I believe free education is everyone’s right,” he adds.

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