Malaysia’s Student Loan Company: Tackling the PTPTN Time Bomb

Abstract

• 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.