KUALA LUMPUR: In light of the non-payment issue of the National Higher Education Fund Corporation (PTPTN) loans, an expert has called for a focus on understanding the root causes instead of placing blame.
Economist Dr Geoffrey Williams said with a staggering 430,000 individuals having made no payments, there is a need for a thorough investigation into the situation.
"The last comprehensive research conducted by PTPTN in 2019 showed that non-payment is due to low incomes among graduates.
"Graduate starting salaries are barely above minimum wage and by the time they rise to reasonable levels after four to five years, the graduates already have other commitments such as families and mortgages."
Williams said this when asked to comment on the 430,000 borrowers who never made their PTPTN repayments.
On Saturday, Higher Education Minister Datuk Seri Dr Zambry Abd Kadir announced that PTPTN would take action against these 430,000 borrowers, many of whom had graduated decades ago.
He said the irresponsible attitude of these individuals had jeopardised PTPTN's financial position, prompting it to take follow-up action, including legal action against defaulters.
Zambry, however, emphasised that PTPTN would remain considerate given the current economic situation.
Williams said among the factors contributing to non-payment are low-income graduate jobs, high commitments for families and career costs, further study costs, and other more expensive and urgent debt on credit cards and loans because of low income.
"These were all identified as causes before Covid-19 and they are worse now."
Williams said it is unfair for people who are struggling to pay their PTPTN loan to be labelled as irresponsible and this negative approach may backfire on PTPTN and the government.
"In the current economic environment, the cost of living is rising, graduate salaries are stagnant, their credit card loans are rising and they have less chance to pay PTPTN. This is the reality."
He said the interest rate or 'ujrah' of one per cent is lower than other loans, adding that in real terms, the PTPTN loan is not increasing like credit card debt, which can be between 15 and 18 per cent.
Williams pointed out that should PTPTN start being harsh, it would have negative effects on voters and would discourage students from taking loans in the first place.
On the long-term consequences for PTPTN and borrowers in terms of debt accumulation and financial health, Williams said PTPTN reported in 2019 that it was suffering from long-term sustainability risk because of low repayments.
"This has not improved significantly and PTPTN is still highly subsidised by the government. This is hugely ineffective and inefficient.
"There is a serious systemic risk from accumulated debt, which poses a risk to the entire financial system because of the size of PTPTN as a government contingent liability."
As such, he said, the system needs to be reformed.
"Student loans around the world have largely failed and PTPTN is no exception.
"To do this, the current PTPTN loan portfolio should be taken into the Debt Management Office in the Finance Ministry and handled separately to recover the debt or manage its write-off.
"Furthermore, PTPTN should focus on saving for higher education through the National Education Savings Scheme (SSPN) and supporting universities, not students, in managing finances.
"Higher education should be funded by direct grants from the government to the students to allow them to choose how to spend them.
"For private universities, where most PTPTN loans go, this would cost only around RM6 billion per year.
"To fund this, the government could introduce a graduate income tax on those who took the grant, exempting those who already paid their loans."