This BN government can postpone loan repayments for political cronies but not for low income students

Media Statement by Dr. Ong Kian Ming, Member of Parliament for Serdang and Assistant National Director for Political Education for the DAP, on the 12th of March 2018

In Pakatan Harapan’s Manifesto which was launched on Thursday, 8th of March 2018, one of the promises outlined was to allow students to postpone the repayment of their PTPTN loans until their monthly incomes reach RM4,000. The next day, PTPTN chairman and MP for Lenggong, Datuk Shamsul Anuar Nasarah criticized this proposal as being unrealistic and irresponsible.[1] He also said that the practice of allowing PTPTN borrowers to defer their repayments for as much as 36 months before they find a job is a more ‘reasonable’ proposal.

What is ironic about the statement of the PTPTN chairman is that the government has given far longer extensions on loan repayments due to cronyism and corrupt deals. For example, in 2007 the government gave a RM4.6 billion soft loan to the Port Klang Authority (PKA) to fund the scandal ridden PKFZ deal.[2] The full servicing of this loan was postponed to 2011 but in 2011, PKA was not in a financial position to start the full repayments.[3] In 2013, the cabinet decided to give another ‘grace period’ to PKA for another 4 years and to allow PKA to start servicing this loan only in 2018.[4] In total, PKA was allowed to defer its repayment for 10 years as a result of the PKFZ scandal. In other words, students who cannot find jobs get a maximum deferment of 3 years but if you are a government owned company who squandered billions of Ringgit because of a corrupt business deal, you can be given a 10 year loan deferment! Barisan Nasional boleh!

Indeed, Pakatan Harapan’s proposal to allow graduates to start repaying their PTPTN loans when their incomes reach RM4000 a month is not something new. This policy – known as income contingent student loans – was one of the policies promised in Shift 5 of the Malaysia Education Blueprint (Higher Education) 2015 to 2025 (See Figure 1 below). Indeed, this policy was explained by Tan Sri Muhyiddin Yassin after the launch of the blueprint in 2015.[5]

Income contingent student loans are currently practised in Australia where students only start repaying their loans when their annual income exceeds AUS$54,000 (or AUS$4,500 a month).[6] Australia is able to carry out this policy because (i) the loan repayments are automatically deducted from the salary of a borrower which has exceeded the minimum income amount (this ensures a high repayment rate) and (ii) the loan repayment amount is calculated based on the income level (the higher the income, the higher the % payback so this ensures that the loan authority remains financially sustainable).

Pakatan Harapan is confident that this policy can be successfully implemented because salaries of fresh graduates will increase under a clean and transparent government and repayment rates will also increase among those who have reached the RM4,000 a month income threshold.

Figure 1: Introducing Income-Contingent Loans for all students in Shift 5 of the Malaysia Education Blueprint 2015-2025 (Higher Education)

[1] http://www.thesundaily.my/news/2018/03/08/pakatans-promise-ptptn-unrealistic-says-fund-chairman, http://www.freemalaysiatoday.com/category/nation/2018/03/08/ptptn-boss-ticks-off-phs-plan/ and https://www.themalaysianinsight.com/s/41831/

[2] http://www.mysinchew.com/node/32668

[3] https://www.malaysiakini.com/news/153292

[4] PKA Annual Report 2013

[5] http://www.themalaymailonline.com/malaysia/article/under-new-ptptn-rules-repayments-contingent-on-pay-increase-ministry-says#DU7MGt4ypHkUik1M.97

[6] http://studyassist.gov.au/sites/studyassist/helpfulresources/faqs/pages/faqs