(Nov 2): I refer to the statement and
press conference made by Wan Saiful Wan Jan, Member of Parliament for Tasek Gelugor on the issue of income contingent loan repayments (ICLR) for PTPTN loans that was raised by Prime Minister Anwar Ibrahim in October 2023. For the record, I served as a board member of PTPTN from June 2018 to January 2020. I was appointed as a board member of PTPTN before I took up the position as deputy minister of Miti in July 2018. I was appointed because of my knowledge on the financial and policy positions of PTPTN. When I was the general manager of the Penang Institute, I published a report examining the financial sustainability of PTPTN.

I think Wan Saiful tried his best during this time as PTPTN chairman to find ways of improving PTPTN’s financial position and to bring about some management changes including the promotion of Ahmad Dasuki Abdul Majid to his current position of CEO. But his effectiveness was hampered over communication challenges he had with the education minister during the Mahathir administration and the higher education minister during the Muhyiddin and Ismail Sabri administrations.

Wan Saiful is right to say that in December 2018, Anwar Ibrahim and the PKR Youth chief Akmal Nasrullah Mohd Nasir did raise concerns with regards to the income contingent loan repayments (ICLR) that were proposed by himself. The challenge was not so much objecting to the concept of ICLR but the way it was going to be implemented. The proposal to significantly reduce the amount of loan repayment for those earning below RM2,000 per month also included increasing the monthly repayments of those earning higher salaries. This would have meant a big jump in monthly repayments of those earning above RM4000 per month for example.

On hindsight, what should have been proposed was an ICLR that was more gradual according to larger income brackets and to have implemented this only for new PTPTN recipients rather than existing borrowers because new borrowers would know about the ICLR right from the start and not be shocked by higher repayment rates if they were to earn a higher salary soon after graduating. They could then plan their finances accordingly including servicing their car loans, their mortgages (if any), and their other monthly fixed expenses.

There were also discussions on exempting those earning below RM4000 / month from servicing their PTPTN loans but the financial cost to the government would have reached almost RM15 billion for 5 years and this was seen as too prohibitive.

There were other ideas put on the table including mandatory monthly salary deductions, harsher enforcement measures against the hardcore defaulters, passport and drivers license restrictions against loan defaulters (as an alternative to the very successful but not very popular travel ban), requiring a family member to a guarantor for the borrower, removal of the first-class honours waiver or replace it with a partial waiver, reduction of loans (with sufficient notice) and discontinue loans to low-rated and non-rated private institutions and courses, increase the current 1% Ujrah loan (because borrowing costs and costs of funds are higher than the repayment interest rates), just to mention a few.

I would also propose a few additional ideas such as the securitisation of some of the PTPTN loans with higher repayment rates (such as those loans from students who graduated with STEM degrees who are able to secure higher paying jobs) and working with responsible debt collecting agencies such as Collectius and others to increase the repayment rate, especially among the defaulters.

The problems at PTPTN are serious. It has been functioning as a cash flow entity for many years rather than as a P&L entity. Its contingent liabilities exceed RM40 billion and the government has to cover its interest payments to the tune of RM2 billion a year (and growing). I do not quite agree with Wan Saiful that PTPTN should be placed under MOF and act more like a financial institution with more powers to invest its funds from the SSPN savings and for it to go out to secure more savings. This would detract PTPTN from its original purpose as a lender to students for higher education, especially for those in the B40 category.

If Wan Saiful is still serious about PTPTN reforms, he should offer his services and experiences as a pro-bono consultant to PTPTN!

Dr Ong Kian Ming
Former MP for Bangi
Oct 20, 2023

https://www.theedgemarkets.com/node/688572