This article first appeared in The Edge Malaysia Weekly on December 6, 2021 - December 12, 2021

The debt burden on young graduates caused by student loans is not unique to Malaysia. Yet as an upper-middle-income country that is on the cusp of developed-nation status, it is appalling that more than half a million Malaysian graduates have never paid off a single sen of their study loans with the National Higher Education Fund Corp (PTPTN).

The fact that 22.2%, or more than one-fifth, of graduates who took PTPTN loans have never made a single payment not only reflects poorly on the borrowers and the values that have been instilled in them but also the lender and its inefficiency in collecting what is due.

For one, the government must know the identity card and phone numbers of the 539,284 graduate defaulters. If all of them only pay RM1 a day, the government stands to collect RM196.84 million a year — a sizeable sum that could aid many others who are more deserving of cash transfers.

If the 539,284 defaulters pay RM100 a month, the government stands to collect more than half a billion a year. The potential collection could well double given that there are also 705,648, or 29.1% of 2.42 million, graduates who are paying inconsistently.

Only 427,861 (17.7%) are paying according to schedule while 751,216 (31%) have fully repaid their loans, according to a written reply in parliament by the Higher Education Ministry dated Nov 24.

The PTPTN problem is not new and the amount involved is huge. As at end-2020, RM39.8 billion or 13.5% of the federal government’s RM294.7 billion direct loan guarantees were for PTPTN. The amount has hardly budged from RM40.35 billion as at end-2016. As at end-Sept 2021, a total of RM64.8 billion had been disbursed to over 3.5 million borrowers.

In 2019, PTPTN told The Edge that 19% had not made a single payment and the borrowers’ names were already with Bank Negara Malaysia’s Central Credit Reference Information System (CCRIS).

The government should make education affordable but that is a separate issue from allowing graduates who took up student loans to default on their obligations. If the graduates cannot pay because they do not have a job, then they should receive help in securing employment instead of being let off without even a slap on the wrist. Allowing non-payment to continue only reflects poorly on policymakers who need to plug leakages and manage public funds even more efficiently to stretch every dollar.

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