The Malaysian Insight

A HOLISTIC solution is required to deal with study loan defaulters as 80% of borrowers find themselves in the B40 group after graduating, said the National Higher Education Fund Corporation (PTPTN) chairman.

Wan Saiful Wan Jan told the BFM Breakfast Grille show this morning that 19%, or 360,000, of borrowers who made no attempt to settle their dues are simply unable to service their loans.

“This is a sad situation. We have to face the fact that up to 80% of our borrowers are earning below RM4,000.”

The B40 group refers to the bottom 40% of households, with a monthly income of RM3,900 and below.

“The 19% of borrowers who are not paying, are not doing so because they don’t want to. They simply can’t afford to,” said Wan Saiful.

“I am really convinced and confident that many of them simply cannot afford to pay.”

However, he said, more work must be put into confirming the matter as the data held by PTPTN and other government agencies is “scattered”.

He said the figures he mentioned – 80% of borrowers earn below RM4,000 a month – are based on his own study, carried out when he joined the national education fund in late June last year.

PTPTN has started public consultations to resolve its RM53 billion debt, of which RM40 billion is from student loans.

Wan Saiful said the debt will rise to RM76 billion by 2040 if the issue of defaulters is not addressed.

An independent advisory panel formed to carry out the consultations is tasked with presenting 10 ideas to resolve the fund’s woes and gathering public feedback.

The ideas are the result of a series of round-table discussions with stakeholders, including financial experts, lawmakers and student groups, held since March last year, said Wan Saiful.

He said he hopes to have the consultation sessions wrapped up by June 13, and for the recommendations to be presented to the government by the end of that month.

“It will be up to the cabinet to make the decision for the education fund.”

PTPTN provides loans to between 150,000 and 200,000 new borrowers every year. It borrows from banks at a rate of 5% interest per annum, but charges borrowers a flat rate of 1% per annum.

Wan Saiful said he hopes to see new terms as the present arrangement costs PTPTN a RM1.7 billion shortfall annually.

“This is a baffling model that we inherited from the previous government… this is an unsustainable model.

“But when you borrow from the financial market, it does not make any sense. We need to fix this. But we don’t want to be a commercial entity by charging borrowers higher interest, like 6% to 7%, while we borrow… at 5%.” – May 28, 2019.