The Malaysian National Higher Education Fund Corporation (PTPTN) was set up in 1997. Since then, it has accumulated a massive debt amounting to RM40 billion in principal plus RM13 billion in interest. All these are guaranteed by the Malaysian government.
It is now the biggest provider of student loans in the country and continues to play a very important role in catalysing socio-economic mobility, especially among the ethnic Malays which is the majority community in the country.
However, the business model employed by PTPTN is irrational and unsustainable. It borrows from the financial market at, on average, 4 to 5 per cent, and lends to students at 1 per cent. No serious effort has been made to revamp this model, and all public discussions around it have been driven by political populism.
The biggest challenge is the low repayment rate. This problem has been ignored because Malaysian politicians of all colours have wanted to maintain popularity. Collecting debt is certainly not popular.
PTPTN, under a new leadership since mid-2018, gathered and developed ideas on how to reform their organization. These ideas have been presented to various levels of government, including to the Cabinet in early 2020.
PTPTN must be reformed to avoid its debt from inflating further. Whether the Malaysian government has the much-needed political will to push through the reforms is a question yet to be answered.
Imprint: ISEAS-Yusof Ishak Institute
Number of Pages: 40
Subject: Education - Organization & Institution
Copyright Year: 2020
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