KUALA LUMPUR: The government was urged today to explore the idea of student loan debt forgiveness on a selective basis for debt-saddled graduates.
Setiawangsa MP Nik Nazmi Nik Ahmad said studies had shown that student loans comprise the second biggest debt incurred by Malaysians.
“It does not matter whether they have a job or not, they are already saddled with debt,” he said during the debate on Budget 2022 in the Dewan Rakyat today.
“We should consider student loan forgiveness, like how we help indebted tycoons via bailouts,” he said, pointing out that most of the borrowers and defaulters are from the B40 community (the lower-income group comprising the bottom 40% of society).
He said debt forgiveness should target certain communities, and distinguish between those who deliberately default on their loans and the involuntary loan defaulters.
“We should also consider the income rate of employed graduates, courses taken by them, and also the loan debt payback period undertaken by the graduates. For example, if someone has been paying back the loan debt for 15 years, his loan debt needs to be forgiven,” said Nik Nazmi, who is with Pakatan Harapan.
He said most student loan borrowers and defaulters were having difficulties securing jobs after graduation, or suffered underemployment by being engaged in low-paying jobs.
Student loan debt forgiveness would improve the position of the National Higher Education Fund Corporation (PTPTN) which he described as financially unsustainable.
“A targeted loan debt forgiveness will free a lot of money into the economic cycle, increase the sustainability of PTPTN’s portfolio and free the money of financial institutions that are tied to PTPTN to be invested into deserving financial sectors,” added Nik Nazmi.
The current amount of accumulated student loan debt in Malaysia is RM40 billion.
In the 2022 budget tabled last month, the government announced a 15% discount for those who make a full settlement of their loan, and a 12% discount for those who wish to settle at least 50% of their loan balance in one payment. A 10% discount would be offered to those who make repayment through salary deductions.