Tuesday, January 15, 2008

National Education Savings Account?

This is the first time I've heard of such a thing. PTPTN private higher education loan division manager Abdul Ghaffar Yusop discussed this new policy in the recently concluded Star Education Fair. The basic idea is that parents must put money into these savings account before their children can be eligible to take out loans from the PTPTN.

It was reported that:

Under a new ruling that comes into force this year, parents with a monthly household income of less than RM2,000 must have deposited at least RM500 in their account to qualify for a loan under the National Higher Education Fund Corporation (PTPTN).

Parents who earn more than RM2,000 monthly must have saved up at least RM3,000.

PTPTN private higher education loan division manager Abdul Ghaffar Yusop said that only orphans are exempted from this new ruling.

“Parents can deposit as little as RM20 a month. The main advantage of the SSPN is that the Government provides a matching grant of up to RM10,000 for parents who earn less than RM2,000 monthly,” he said.

Other benefits of the SSPN, which is administered by PTPTN, include yearly dividends that are tax-exempt.

This must be a response to the high rate of non-payment among students who have previously taken out loans from the PTPTN for purposes of pursuing a higher education degree. I've been consistently favorable that these students should be vigorously pursued to pay back their loans. But I think there are better ways to enforce this than to force parents to put money in an education savings accounts. The PTPTN can work with credit collection agencies or even with the International Revenue Service to collect on these loans. I'm less in favor of punishing parents (or forcing them to open up another forced savings account) for the sins of their children.

The other concern is that parents might not be aware of the need to open these savings accounts or that they might not be able to put enough money into these accounts by the time their children need to apply for the PTPTN loans.

But if this is one of the ways to send a clear signal that PTPTN loans are not 'free', then perhaps it is the lesser of possible bad solutions. It forces parents to save for their children's education so that they don't think that higher education is necessarily free, especially in public universities. And there are incentives such as tax free dividends and matching grants.

I haven't done enough research on this yet but does any of our readers know more about this savings account?


WY said...

one off savings of rm500 or rm3000 for a education loan that probably going to cost about rm10000-20000...i don't see how is that will be a burden or barrier to education loans. parents ought to take some responsibility for the eudcation of their children. if they can't afford it, dont ahve so many of them!

i thin there should be more than just the total monthly household income on the equation.

Anonymous said...

The person who think of this method is one that has old mind and usually a "loser". Why I say so? This is my experience when dealing with people who could not handle you directly but going above you to talk to your parents, trusted friends, relatives, hoping they would "talk" and "convince" you to obey his term. Such person can also pull in God as their "backup" and "witness".

I can't find one word to describe this kind of people except may be "lanchiao"...? Sorry, bad word. But it is a form of education kids nowadays should learn to equip themselves from being conned. :-)

hannna said...

I think its a great idea, they're teaching us to save!

Perhaps they realise the importance of people realising how much it costs for an education overseas and how much students would need one as compared to local education?

Anonymous said...

The SSPM is a good savings scheme. It gives a higher return than a conventional fixed deposit and is tax deductible. If the government is doing something right, then this is it.

Anonymous said...

Tony, I happen to suddenly remember Singapura has this old scheme they are still operating call the Edusave. Their Government pays money into student account to be used for approved academic or school activities.

Can research and see if what is being done in our boleh land is same or similiar? If so, maybe we can learn from Singapura's history and experience of operating this kind of savings scheme. The good and poor, pitfalls and remedies. Leapfrog from their experience.

Anonymous said...

I ROFL on the idea.

Seems this PTPTN people NEVER use their brain. Implement their logistic are plain stupid.

I am quite astonish that PTPTN sitting on huge amount of $$$$$$$ that surpass all small banks in Malaysia FAILED to implement a collection system. Duh, even the most pathetic peanut banks are able to run a credit card department and never failed to collect the money.

PTPTN loans issuance and collection are SUPPOSE TO BE RUN EFFICIENTLY AS a bank business. If they don't have the expert, just ask BNM loan them.

BTW, I don't see a light from the PTPTN tunnel, because it need a revolution.

Anonymous said...

Unlike what is now popular, I am not a fan of forced savings. I am not anti forced savings because it has proven to be useful.

Whether its a good idea to have forced savings depends actually on
1) Income distribution of people and
2) Accoutability/efficiency of government/administration of the funds.

Forced savings is good for poor. There is no doubt about it. BUT its not good for the middle class and above. Because our GINI coefficient is high, I tend to think forced savings is not a bad idea.

However, our accountability system is NOT good which leads me to believe that this is NOT a good idea.

So really, this is not a bad or good idea. It helps but it also does not do what is needed.

Is there a better alternative then? Yes - good cheap education. But that is even harder to do. So what is then the alternative? The government is better off giving loans and setting up programs for poor students regardless of results to go Singapore to get their education but politically that is suicide.

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