With RM11bil arrears, it’s time to act against PTPTN defaulters

When the stringent measures were implemented, the repayment rate was said to have peaked in 2017 at 79.3% with borrowers repaying RM5.19bil of a total of RM6.55bil.

Unpaid tertiary education loans to the National Higher Education Fund Corp (PTPTN) have reached an alarming level.

According to the Auditor General’s (AG) Report, nearly RM11bil is in arrears as at end of 2023, the highest in a decade.

The report revealed that borrowers repaid only RM3.55bil in 2023 to the country’s main tertiary education loan provider, with some of the unpaid balances exceeding 12 years.

Allowing these arrears to continue growing is simply a waste of government’s resources, which could be channelled to those in need of loans.

As it is, the agency has been using loans from local financial institutions to carry out its functions.

With interest-free loans being offered to PTPTN borrowers, how is the agency servicing higher interest rates for its borrowings with financial institutions?

The AG Report indicated that PTPTN’s outstanding education loans stood at RM43.68bil as at end of 2023, while the fund’s borrowings from financial institutions totalled RM41.13bil.

It would be interesting to know the funding cost for PTPTN in providing these loans to tertiary students.

PTPTN must review and step up its loan repayment collection mechanisms, and carry out the reinstated enforcement actions approved by the Cabinet in July 2024.

The report also recommended a review of the repayment discounts and exemption incentives provided to borrowers who graduate with first-class degrees.

Strangely, the enforcement mechanisms ceased in 2018, resulting in the spike in arrears.

When the stringent measures were implemented, the repayment rate was said to have peaked in 2017 at 79.3% with borrowers repaying RM5.19bil of a total of RM6.55bil.

Some of the measures included blacklisting loan defaulters in the Central Credit Reference Information System or CCRIS and barring them from leaving the country.

Enforcement mechanisms, as stipulated under Section 23 of the National Higher Education Fund Board Act, comprise issuing overdue notification letters, reminder letters, enforcement action reminder notices, notices of demand, court summonses, judgements and travel restrictions.

If such measures were effective in improving collection, why were they discontinued in the first place? Discontinuing them has likely contributed to the record high unpaid loans, resulting in massive wasted resources and depriving students who genuinely need financial assistance.