Emilia Tan24 October 2014 Issue No:340
With the cost of university education rising faster than inflation and
increasing sums taken out in loans, more and more students are
defaulting on their loan repayments. For some, this means being barred
from leaving the country.
In fact, almost 85,000 recipients of student loans from the government’s low-interest National Higher Education Fund Corporation have to date been stopped because of loan arrears. They join criminals, tax dodgers and pension fund defaulters in facing departure bans.
Generally, private sector costs have increased by 20% to 25% in the past five years where there are now more than 100 colleges and foreign branch campuses. HSBC Bank estimates the total annual cost of an undergraduate degree, including living expenses, at around US$13,000.
Earlier this year, Yemen’s higher education and scientific research ministry said it would end new government scholarships for its students to enrol in private Malaysian universities because of “poor educational quality and high costs”. Some 9,000 Yemeni students are enrolled in Malaysia, 4,000 of them in private universities.
Although the Yemeni case is unusual, the decision attracted wide publicity and dented the government’s attempts to portray Malaysia as a low-cost alternative to universities in the West and in Singapore.
Loans
While students are able to get low-interest government loans – loans for private university courses are about a third of all government-backed loans – these do not cover the whole cost at private institutions. Yet more and more students are enrolling in the private sector because of a lack of places in the top public universities.
Overall cost of living rises are also putting financial pressure on families. The Keadilan Youth or KeADILan, the youth wing of the National Justice Party of Malaysia or PKR, said that with low starting salaries, Malaysian graduates “cannot make ends meet”.
“Many local graduates have the added burden of repaying their PTPTN [National Higher Education Fund Corporation] education loans and this can cost up to RM300 a month," the group said in a statement.
PTPTN chief executive officer Agos Cholan said the corporation had to resort to barring the defaulters from leaving Malaysia because they had ignored repeated reminders to repay their loans. To have the ban lifted, Agos said defaulters would need to make some payments immediately, depending on their income, and would need to sign papers committing them to pay monthly sums.
Rapidly shrinking fund
Although the number facing bans is unacceptably high, it is down from some 130,000 in 2007 after the government converted some loans to grants for top performing students. More than 14,000 blacklisted PTPTN borrowers paid back their loans in 2013 compared with some 10,000 the year before.
In a statement, PTPTN said as many as 500,000 borrowers had defaulted on their loans since the fund was established in 1997. While not all have been barred, it means the amount of money in the fund is rapidly shrinking and affecting the PTPTN’s ability to lend to new students.
Fund chairman Shamsul Anuar Nasarah said the corporation was finding it too difficult to finance new students because of the high number of defaulters and with RM1.2 billion (US$367 million) in unpaid loans outstanding.
The 2015 budget announced this month gives PTPTN borrowers an incentive to make lump sum payments by March next year when they will receive a 20% discount on their loans. Those who pay consis¬tently for 12 months until the end of 2015 will be offered a 10% discount.
But student groups criticised the government for being more concerned about propping up the loan corporation than easing the fees burden on students with more scholarships.
Their criticisms of the government came after Malaysia’s second Education Minister Idris Jusoh said PTPTN loan defaulters stretching back to 1998 could be blacklisted on a bank database used to sanction new loan applications. This would have an effect similar to being declared bankrupt and could affect graduates’ ability to buy a house, for example.
PTPTN has disbursed RM5.3 billion (US$1.62 billion) to more than 990,000 students since 1998.
In fact, almost 85,000 recipients of student loans from the government’s low-interest National Higher Education Fund Corporation have to date been stopped because of loan arrears. They join criminals, tax dodgers and pension fund defaulters in facing departure bans.
Rising costs affect even students from middle-income families who are now graduating with a large debt after a three-year undergraduate degree that costs more than RM60,000 (US$18,000).
The outlay is much higher at a private university or a foreign branch campus. In a public university, a medical degree can cost as much as RM300,000 (US$92,000) whereas private colleges charge three times that much.
Generally, private sector costs have increased by 20% to 25% in the past five years where there are now more than 100 colleges and foreign branch campuses. HSBC Bank estimates the total annual cost of an undergraduate degree, including living expenses, at around US$13,000.
Earlier this year, Yemen’s higher education and scientific research ministry said it would end new government scholarships for its students to enrol in private Malaysian universities because of “poor educational quality and high costs”. Some 9,000 Yemeni students are enrolled in Malaysia, 4,000 of them in private universities.
Although the Yemeni case is unusual, the decision attracted wide publicity and dented the government’s attempts to portray Malaysia as a low-cost alternative to universities in the West and in Singapore.
Loans
While students are able to get low-interest government loans – loans for private university courses are about a third of all government-backed loans – these do not cover the whole cost at private institutions. Yet more and more students are enrolling in the private sector because of a lack of places in the top public universities.
Overall cost of living rises are also putting financial pressure on families. The Keadilan Youth or KeADILan, the youth wing of the National Justice Party of Malaysia or PKR, said that with low starting salaries, Malaysian graduates “cannot make ends meet”.
“Many local graduates have the added burden of repaying their PTPTN [National Higher Education Fund Corporation] education loans and this can cost up to RM300 a month," the group said in a statement.
PTPTN chief executive officer Agos Cholan said the corporation had to resort to barring the defaulters from leaving Malaysia because they had ignored repeated reminders to repay their loans. To have the ban lifted, Agos said defaulters would need to make some payments immediately, depending on their income, and would need to sign papers committing them to pay monthly sums.
Rapidly shrinking fund
Although the number facing bans is unacceptably high, it is down from some 130,000 in 2007 after the government converted some loans to grants for top performing students. More than 14,000 blacklisted PTPTN borrowers paid back their loans in 2013 compared with some 10,000 the year before.
In a statement, PTPTN said as many as 500,000 borrowers had defaulted on their loans since the fund was established in 1997. While not all have been barred, it means the amount of money in the fund is rapidly shrinking and affecting the PTPTN’s ability to lend to new students.
Fund chairman Shamsul Anuar Nasarah said the corporation was finding it too difficult to finance new students because of the high number of defaulters and with RM1.2 billion (US$367 million) in unpaid loans outstanding.
The 2015 budget announced this month gives PTPTN borrowers an incentive to make lump sum payments by March next year when they will receive a 20% discount on their loans. Those who pay consis¬tently for 12 months until the end of 2015 will be offered a 10% discount.
But student groups criticised the government for being more concerned about propping up the loan corporation than easing the fees burden on students with more scholarships.
Their criticisms of the government came after Malaysia’s second Education Minister Idris Jusoh said PTPTN loan defaulters stretching back to 1998 could be blacklisted on a bank database used to sanction new loan applications. This would have an effect similar to being declared bankrupt and could affect graduates’ ability to buy a house, for example.
PTPTN has disbursed RM5.3 billion (US$1.62 billion) to more than 990,000 students since 1998.
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