Tue07172018

LAST_UPDATETue, 17 Jul 2018 1pm

Pakatan’s Plan For PTPTN, How Much Will It Cost Malaysians?

Filepic: HMetroFilepic: HMetro

The National Higher Education Fund Corporation (PTPTN) loans were a major point highlighted in the recently unveiled manifestoes of both Pakatan Harapan (PH) and Gagasan.

PH proposed that they will postpone PTPTN repayment until borrowers have a minimum income of RM4,000 while Gagasan proposed to write off existing  PTPTN debts to ease the burden faced by youths should they take over Putrajaya.

Barisan Nasional Strategic Communications Director Datuk Seri Abdul Rahman Dahlan had immediately noticed the U-turn made by PH when it previously said it would eliminate PTPTN, asserting that proves PH's promises are unrealistic.

As for Gagasan’s proposal to write off existing PTPTN debts, the fact that no mechanism was provided already speaks volumes.

As PTPTN loans has always been a hot issue in Malaysia, Malaysian Digest decided to firstly canvas the opinions of existing borrowers.

What PTPTN Borrowers Have To Say About Delaying Repayment

Both coalitions’ promise on PTPTN were undeniably meant to appeal to youths, especially past and present PTPTN borrowers, but those who spoke toMalaysian Digest were unsure about the proposed measures.

While the proposal to delay the repayment initially appealed to Andrew, he had second thoughts after thinking about it further.

“I’d rather start paying even a minimum of RM10 rather than delaying it because I would like to be free of loans as soon as possible.

“Because we are only going to apply for more loans as we age and if I can be rid of my education loan as soon as possible then why not,” said the 23-year-old, who added that this proposed scheme would give more room to irresponsible individuals to evade repayment.

And while he is absolutely fine with writing off the debt altogether, he understands that it is not realistic as he realises that PTPTN would have a problem to generate funds for future students.

Dayana, 25, on the other hand does not see how postponing the repayment would help individuals as she said that the monthly minimum pay would be higher.

“I remember even before I secured a job, I received a letter from PTPTN which asked me to pay a minimum of RM150 monthly.

“So if I earn RM4,000 a month, that would demand me to pay more on a monthly basis, and that could serve as a problem to my financial cash flow,” she said.

Having settled his PTPTN loan, Rafi doesn’t think either option is feasible while still offering monetary education funds for future borrowers.

“I don’t think it’s wise to delay the loan repayment because it gives borrowers more reason and room to ignore their loans, and this could affect future borrowers.

“As for writing off the PTPTN debt – I think it’s unfair for those who have paid back their loans, as selfish as it sounds. I’m also curious as to how the future students would be given financial aid,” opined the 25-year-old, who does not believe that Malaysia has arrived at a level where delayed loan repayment, or abolishing it, is possible.

Amelia, 36, also cannot see how postponing repayment will actually be of help to borrowers as she sees that RM4,000 as minimum income prior beginning to pay back their loan is too high.

“I think it’s better if the minimum fee is lowered, such as RM50 a month, instead of increasing the minimum salary [to start repayment]. That way, it’ll encourage borrowers to pay back, and not give them the opportunity to run.

“Let’s be real, most people who earn high income would have tendency to grow materialistic and ignore their loans,” she stressed.

It would seem that the young debtors we spoke to are already doubtful about PH implementing their promise on delaying PTPTN loans.

What do the experts say?

The Shortfall In Funding Would “Definitely Be In The Billions”

Following the unveiling of Pakatan’s manifesto, PTPTN chairman Datuk Shamsul Anuar Nasarah said in a press conference that the proposal by Pakatan is unrealistic and a populist move, as PTPTN has previously studied similar measures but found it unpractical to be implemented.

"Such measures will only lead to the increase of borrowers who will not repay their debts.

"It will cause us to continue to rely on other financial measures to allow us to provide funds to new students," he said, as reported by theSundaily.

Shamsul asserts that PTPTN already had put in place options for grace period for repayment in a flexible manner adding that PH’s proposal is not realistic.

He said that repayment grace period for PTPTN borrowers have been extended to 12 months after the conclusion of their course, NST reports.

“Borrowers can also delay their loan repayments for another 24 months if it is proved that they are unable to pay their loans.

“We feel that the grace period and extension given is a reasonable time frame for borrowers to get a job.”

Malaysian Digest managed to get in touch with a former high-ranking official at the Ministry of Finance to share with us how much it will cost the government should the proposed measures are implemented.

Speaking under the condition of anonymity, the retired official said that although he was unable to share the exact figures that the government will lose, he said that it would definitely be in the billions.

“Between 1997 and January 2017, PTPTN have given out a total of RM48.7billion in education funds, and from that sum (and the same period), the establishment has only managed to collect RM10.8billion out of RM18.8billion.

“As of early last year, Malaysia has 663,000 borrowers who have yet to pay back their loans and that totalled RM4.7billion,” he revealed.

Therefore, he said that these proposals will definitely have a big impact on the budget to compensate for the high spending for education loans where some sections of the budget would have to be reduced or taxes would have to be increased for the budget to be formulated properly.

“Reducing the budget is a very sensitive topic, because Malaysia is still a developing nation and therefore, almost all ministries would want their budget to be increased, not decreased.

“And because the borrowers are the ones at fault for the high outstanding amount – a lot of ministers, politicians, civil servants, would deem unfair that they have to be deprived of funds to ease the borrowers’ ‘burden’,” he said.

He added that Malaysians in general would also not be happy if they need to pay higher taxes to accommodate these proposals “because Malaysians’ household income is not at par with rising cost of living, inflation and etc.”

Malaysians May Need To Pay Higher Taxes To Compensate

The manifestoes have also baffled Ameera Kaiser, a financial analyst attached to a government-linked company and who is privy of the government’s cash flow.

Asked to comment on each of the manifesto given by Pakatan and Gagasan in regards to PTPTN, the 38-year-old said that while she understands Pakatan’s intentions to help lighten the burden of fresh graduates to give them time to get their career on track, she questions the reasoning behind proposing RM4,000 as the minimum wage to start repayment.

“Currently, the average starting salary for fresh graduates with a Bachelor Degree is RM2,500. The average salary increment across all sectors is at least 5%, while employees with exceptional or niche skill sets can possibly experience an increment between 25% and 30% - but keep in mind that some employers DO NOT award their employees with increment, and some contract employees are deprived of the perk.

“Therefore, it is highly likely that it would take at least between three to five years for the average employee to earn a salary of RM4,000,” she said.

As such, she is not confident that PTPTN would have sufficient funds to provide financial aid for future students with this proposed scheme especially when it is widely known that borrowers are notorious for not paying back their education loan causing PTPTN to experience insufficient funds.

Pic: RemajaPic: Remaja

And as for Gagasan’s proposal, she sees it as too idealistic and unfeasible due to the fact that Malaysia does not have even have sufficient monetary funds to sponsor all children coming from families in the B40 category.

“That, coupled with PTPTN’s current predicament, is a clear indication that abolishing PTPTN loan repayment is not wise.

“To put this in perspective, let’s assume those who currently refuse to pay back their education loan are instead borrowers who needn’t repay their loans, and look at where PTPTN is now,” she argued.

Because of that, these proposals would not be financially prudent for the government, regardless of who is at the helm, as it will demand the government to increase taxes to help compensate for the abolishment of PTPTN loan repayment or even delayed repayment.

Ameera mentioned that Nordic countries are able to afford free higher education to all of their students – excluding Denmark and Sweden, who introduced tuition fees for international students hailing from outside the European Union and the European Economic Area – thanks to high taxes and the expensive cost of living in these countries.

“So therefore, for Malaysia to completely forego PTPTN loan repayment or delay it, Malaysians would have to make sacrifices such as higher taxes and so forth,” she said.

At the moment, Ameera can only see long term effects where the government could potentially be run to the ground in the absence of proper planning and consideration and Malaysians could be forced to pay more and higher taxes to compensate.

“As for the students, this could only mean that some students are deprived of financial aid to pursue their education – which the country and PTPTN is already experiencing.

“Again, these proposals may be well-intended, but my apologies, Malaysia is not as financially lucrative as some would hope,” she concluded.

-mD