THE Government should bail out the National Higher Education Fund Corporation (PTPTN) in order to prevent a crisis from happening, says HELP University economist Geoffrey Williams.
He noted that the fund had been having little progress when it comes to collecting payments as some defaulters are avoiding the repayments, using the COVID-19 pandemic as an excuse rather than actual reason.
Williams believe that the problem revolving around PTPTN has become big enough to cause a ‘systemic financial crisis, especially if borrowers continued to default.
“The only real ideas PTPTN came up with so far to resolve the issue are very draconian, which was to impose travel bans on defaulters and their families,” he stated.
Williams also told a local newswire that the system in which PTPTN was operating was unstable, with debtors too poor to repay considering low salaries and high graduate unemployment rate.
“The fund does not raise enough in repayment to finance itself or to provide the RM4.3 bil needed each year to extend new loans and dispense money for existing loans. So the Government has to bail it out,” he said.
He suggested that the Government find a fresh system to fund higher education and have PTPTN provide loans on a smaller scale, even if it was to only top up direct funding from the Government.
“A study must be conducted in Malaysia given the impact of COVID-19 on the overall repayment problem,” he opined.
Alternatively, he said that the Government could clear the arrears through a targeted debt relief scheme, which could help to cancel the debts of overburdened students and help them settle the debts early so that PTPTN can start providing funds to financial institutions, allowing it to invest in profitable options and inject investment into the market at a time when it would be needed more.
Repayments should be taken seriously
Student loan repayments is an aspect of life that most people have to deal with, but with the right planning, it doesn’t have to be as much of a burden as people usually would think.
Despite that, high numbers of defaulters are still an issue for the corporation. According to Ascendur Bistari Sdn Bhd consultant and financial planner Jon Ti Yi Hong believed that some of the main factors for graduates not to repay their loans are the rising cost of living and their initial take home salary.
“Should the graduate secure a job, a 10-15% commitment from their take-home monthly cash flow is significant, considering the provisions required for basic living expenses and emergency contingencies.
“Repaying student loans would likely be the lowest priority when cash flow is tight,” he said.
Regardless, he says that repayment of student loans should be taken seriously. – Dec 5, 2020
