Economist calls for bailout of PTPTN, defaulters
Geoffrey Williams of HELP University says a systemic financial crisis is possible if borrowers continue to default on their loans.
PETALING JAYA: An economist has proposed that Putrajaya bail out the National Higher Education Fund Corporation (PTPTN) and defaulters on its loans to prevent a crisis.
Geoffrey Williams of HELP University noted that the fund had, over many years, made little progress in collecting repayments.
He said the problem had now become so big that a “systemic financial crisis” was possible if borrowers continued to default.
Williams said the only “real ideas” PTPTN had come up with so far to resolve the issue were “very draconian”, such as its proposal last year to impose travel bans on defaulters and their families.
He told FMT the system in which PTPTN was operating was unstable, with debtors too poor to repay, “graduate salaries too low, and graduate unemployment too high”.
“The fund does not raise enough in repayment to finance itself or to provide the RM4.3 billion needed each year to extend new loans and dispense money for existing loans.
“So the government has to bail it out,” he said.
Williams said financing the debts alone would cost about RM4.75 billion each year, including a direct government subsidy of RM1.75 billion, which could be saved and reinvested into the system.
He suggested that the government find a fresh system to fund higher education and have PTPTN provide loans on a smaller scale, “perhaps only to top up direct funding from the government”.
He also said the idea of monetising student loans had been studied by the highly respected Levy Institute in the US and shown to have significant economic benefits.
“A similar study must be conducted in Malaysia given the impact of Covid-19 on the overall repayment problem.”
Alternatively, he said, the government could clear the arrears through a “targeted debt relief” scheme.
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He said there were three benefits of using such a scheme:
- It would cancel the debts of overburdened students, helping them to rebalance their finances and releasing funds into the hands of three million people which could be spent in reviving the economy;
- It would remove the risk of default on the more than RM50 billion PTPTN loan portfolio; and
- It would settle debts early and provide funds to financial institutions which could invest in profitable options and “so inject investment into the market at a time when it would be much needed”.