Monday, June 16, 2008

PTPTN loans - some practical solutions

For those who don't know, PTPTN loans are low cost loans given by the government to students studying at universities in Malaysia. I've always supported the government's moves to track down those who fail to repay their PTPTN loans. If the default rates continue at the current rate, the allocation given to PTPTN might be used up pretty soon.

The loan default runs into many millions of taxpayers dollars and puts the viability of this program in jeopardy. Which makes me ask these questions - why is the default rate so high and is PTPTN the best vehicle to channel these loans?

I don't know what the exact default rate is like but it has to be pretty serious for PTPTN to consider pretty drastic measures to track down those who fail to repay their loans. Some of the measures proposed includes blocking their passports and blacklisting them on credit bureaus which would make it difficult for them to take out housing and car loans.

My sense of why the repayment rate might be low is that those who take out the loans don't think that the government will go after them if they fail to pay back their loans. There is a feeling that the government is too inefficient to go after them or that the government simply doesn't care about them not paying the loans back. After all, many JPA scholars do the same, don't they? Furthermore, there might be a sense of entitlement that I deserve a scholarship to go to university and as such I shouldn't be made to pay back this 'loan'.

Which brings me to the 2nd question. Is PTPTN the best organization to be in charge of managing these loans? Would, for example, giving this responsibilities to banks a better solution?

One of the reasons why these loans are taken up by the government is because banks would not want to give out loans to students who can only pay them back in 3 or 4 years time. Furthermore, these PTPTN loans are subsidized in that they have low or no interest rates (in addition to a management fee) on the grounds of encouraging potential students to attend university and by doing so, provide a public good for the country.

Given this market failure, would it not make sense if the government were to subsidize these loans through banking institutions who have a much better infrastructure to manage these loans (and to collect on them)?

Anyone who is familiar with the credit collections process would be able to tell you that it is a very tricky process requiring dedicated resources and creative ways of pressuring those who have not paid their loans to pay up. I have no reason to think that the PTPTN civil servants are in a better position to chase down these loan defaulters compared to professionally trained staff in private banks who are given financial incentives to chase down loan defaulters. Given this, wouldn't it make more sense from an administrative and efficiency point of view to subcontract loans to university students to the financial sector instead of keeping it as a government function?

If PTPTN does not want to let go of the whole loan giving business, there is also the option for it to subcontract the process of chasing down loan defaulters to recognized credit collection agencies.

Long term, the government has to rethink its role in giving loans to potential university students given that a larger and larger proportion of the population is going to institutions of higher education. I personally don't think that what they are doing now is sustainable. Although there are a lot more complexities involved, I think it makes more sense for the government to allow the private sector to take over this responsibility stepping in only to provide some sort of guarantee or financial subsidy for these financial institutions to give out these loans to students who will only be able to repay them after a lag period.

After all, most banks in developed countries make a good profit from making student loans to potential students, many of them without having any government subsidy or guarantee. Without significant changes, I don't see how Khalid Nordin, the Minister for Higher Education can achieve an 80% repayment rate for PTPTN loans.


Anonymous said...

I got PTPTN for university to fund my drunken debauchery.

I have all documents with me. Including the blue contract. I graduated in 2002 and I went to the office to pay my dues at Jalan Semantan. However, they can't seem to find my files. I wasn't in their database and systems. The officer says that he doesn't have my records at all.

Then I came back 6 months later, and again the same story. I went back there as many as 4 more times. Offering my contracts and bank statements as proof that I loaned the money but they told me they would to work on it from their end.

It is 2008 and there isn't any news from them. How..? My fault? If I were to pay the full amount and give it back to them. They can't find the records and they take the money, I am just afraid that in the future they do not have or deny all records of me paying back the loan. Thus I am now still waiting for their reply.

The last visit to PTPTN was March 2008 :)

Malaysia Boleh

Anonymous said...

That says alot of our "third class mentality and facility" for offering and chasing education loans provided by the government agencies.

It is either they are not bothered to look for the information or just the system for the misplacement of the files. It is also made worse by the those who have taken the loan but fail to see the reason why they need to start paying back when they start working.

We need to remember that these loans are for those who needs it, therefore it is important that we pay back out loans so that others can benefit from it as well. On the otherhand, my advise to the PTPTN people, get your act together, if you want to get the defaulters to come back and pay you, you will need to know all the information about them, that including to have their files on hand!

Anonymous said...

And still they want to extend the deadwood retirement age!!! Ayo!!! Abdullah Badawi please rule the country properly....

Anonymous said...

Dont the PTPN have their own accountants and auditors to balance and check their accounts? Or are their accountants produced from local accounting degrees?

Anonymous said...
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Anonymous said...

Dear Readers,

Actually all fuss or suggestion should not be an issue, IF, IF,IF, the government make education free for all. From kindergarden up to Doctored Degree.Rather than send our malaysian tourist to space etc..

Anonymous said...

hi all,
i heard somebody said if you get second upper class, you can get 70% discount, is that true?

Anonymous said...

Hahahaha..... The discount is only for those who got 1st Class.

Why worry, I have developed and been practicing a specialized method to pay back my PTPTN loan. The best part is at the end I even can save about RM30K~60K solely by depending on my method while paying my PTPTN loan.

If you think it's not possible... I can show you it's possible.
No MLM or Investment on any ponzi scheme but i do charge a small fee as I have developed this method fully using legal channels.... j

Just e-mail me at and let's see if you can benefit from my method.