‘Deferments will raise our debt’

Unpaid loans will amount to RM76bil by 2040, says PTPTN deputy chief

KUALA LUMPUR: The National Higher Education Fund Corporation (PTPTN) will be RM76bil in debt by 2040 if it goes ahead with deferring loan repayments for borrowers earning below RM4,000 a month, says the corporation’s deputy chief executive (policy and operations), Mastura Mohd Khalid.

She said this is almost double the current debt of RM40bil that the corporation has today.

She was speaking at a briefing on the corporation’s public consultation exercise on ways to improve its financial viability yesterday.

Mastura said the repayment on the principal alone ranged from RM3bil to RM6bil a year, while the interest, borne by the government, is more than RM1.7bil a year. And it continues to grow.

She added that previous practices have led to a massive repayment shortfall, which had forced PTPTN to borrow more money if it wants to continue providing loans to students.

“The government subsidises 90% of a Malaysian student’s costs to study at a public institution of higher education,” she said, adding that 63% of borrowers are graduates of public institutions of higher education.

Mastura said the debt owed by the government becomes bigger when it provides a loan waiver for first-class graduates, repayment incentives in the form of discounts and the low ujrah rate of 1% on loans.

Ujrah is a flat-rate service charge of 1% annually based on syariah principles.

She said that more funds will be needed to support the growing number of students, which is projected to reach 250,000 by 2040.

She also said more than half of PTPTN borrowers have not been paying consistently or have not started servicing their loans at all.

A total of 19% of borrowers who owed RM2.8bil have not begun repayment.

A total of 616,000 borrowers have been paying back inconsistently.

This group owed arrears RM3.5bil as of Dec 31, 2018.

“As of 2018’s end, the outstanding amount has reached RM6.3bil, with 68% of defaulters having not paid for more than a year.

“Only 32.5% of the RM56bil disbursed to date has been repaid.

“The total number of students requiring loans from PTPTN is also on an upward trend, and is expected to grow from 180,000 today to 250,000 by 2040,” she said.

Mastura said that to ensure the loan’s sustainability, borrowers of have to repay their loans consistently and in full.

She warned that there is a high risk that its loan financing facility will eventually collapse if nothing changes.

PTPTN chairman Wan Saiful Wan Jan said 70% of borrowers are drawing a monthly salary of below RM4,000.

He said for every RM7,000 of debt cancelled, one new PTPTN applicant will have to be rejected.

“So, if we release a borrower who owes RM21,000 from his responsibility to pay today, then next year there will be three SPM leavers who may have their loan applications rejected.”