Is PTPTN out of the woods yet?

My former senior colleague, Mr. Yeap Boo Yam, formerly the Chief Editor of the online news portal, had kindly invited me to contribute one article to the relatively new publication, The Selangor Journal recently.

Mainstream press missed the forest for the tree

The topic of my article was a commentary on the performance of the National Higher Education Fund Corporation (PTPTN) where I noted this was glaringly missing from all mainstream reports when figures on PTPTN were released. Everyone seemed to be fixated by the magic 410,500 bad debtors who never repaid a single sen! No one cared to notice the tremendous difference that the stringent (or more like “industry standard practice”) debt recovery efforts coupled with the barring of bad debtors leaving the country had on the debt collection figures.

As a student of higher education management, I started to collect historical data on PTPTN’s performance and was able to pull these out to compare PTPTN’s performance for the last 11 months. The funny thing is, why PTPTN could not publish a report card regularly and why do we have this seemingly odd “11 months” data rather than a yearly figurs to make comparison more valid?

PTPTN’s fund is for local studies only

Lately, there has been some talk of, in view of PTPTN’s greater recovery of debts, to consider giving loans to Malaysians for overseas studies. In my humble opinion, this is beyond the scope and duties assigned to PTPTN. PTPTN’s main role is to make sure that the playing field, as far as access to higher education is concern is made as level as possible for all eligible Malaysians. PTPTN’s main mission is therefore to ensure that qualified student should not be kept out of universities or colleges because he/she comes from an underprivileged background. We have collectively 500 plus colleges and universities (both private and public) providing academic diploma, degree and higher level studies where most, especially those in the private sector are chasing after students.

College “seats” are not being filled up. Partly this is due to a cut back in PTPTN funding in November 2014, especially severe for the private sector. I feel that the priority is to maximize PTPTN’s pool of funds for local tertiary studies where the cost of degree studies is a fraction of what you can buy overseas (principally in the West). Anyone aspiring to study overseas should be free to do so but at  his/her own financing. PTPTN, I feel should be reserved for students who are enrolled in local institutions of higher learning ONLY! One needs not go overseas for a degree if one does not have the financial means to do so since there are plenty of local alternatives, many are just as good academically as their overseas counterparts.

Putting my money where my mouth is

My wife and I practiced what we “preached”, we paid for our son, Leland’s entire 3 years of studies at the University of Nebraska-Lincoln using our own savings.  Leland found work on campus to help pay for some of his expenses to help to lessen our burden. If for whatever reasons that we were not able to fund this, our son could have had the option of remaining at SEGi University to complete his Bachelor degree, after all, our son was awarded a full tuition-fees waiver as a scholar of SEGi University in 2013. The fact that we “broke the bank” in so doing (the US$ went from US$1=RM3.20 to touch US$4.50 at its peak  during our son’s studies, adding 40% to the total cost) was a consequence that we had to accept and had to bear in order for our son to experience living and learning in the USA. We are still “nursing” a “sizable” bank overdraft and we still owe my elder sister for the US$9,000 that she loaned us! That is the price we had chosen to pay (and the kind help we received from our sibling). We would never expect PTPTN to help us in any way at all.

The Selangor Journal  –  a ‘hot’ item!

It seems that The Selangor Journal is an hot item at the various distribution points and I could not get hold of a copy till Mr. Yeap gave me one today! A photograph of my article is provided below.


Rank universities by PTPTN default rate of their graduates

PTPTN should only give out loans to people who have the best chances of repaying and minimise its exposure to those with a high chance of default. Ranking of colleges by the rate of loan defaults by their graduates will allow PTPTN to be more equitable in distributing student loans.

I wrote this as one of my contributions to my former college’s blog. At that time, (September 01, 2016 to be precise) Hilary Clinton was set to pick up the US presidency. Now we know to take pollsters’ “conclusions” with a large table spoon of soy source! In view of the results of the poll in the US presidential election I had edited the last sentence of the last paragraph!

My argument is simple. If an institution keeps churning out graduates who are likely to default on their student loans, then the risk factor to the loan awarding body for this institution should be higher. Thus a ranking of colleges and universities with the highest rate of default among their graduates will force all colleges and universities to educate their students accordingly. PTPTN can also distribute its funding more fairly whereby colleges with good graduate repayment records (i.e. lower risk) will be given more allocation or even higher quantum of loans for its students. At present, the private sector students only get the maximum of 85% of the top loan for their respective fields of studies. This translate to no more than RM13,000 for most students following a diploma programme. With an average price tag of RM30,000 for a full diploma (for colleges not among the top players), the maximum PTPTN loan will cover no more than 43% of the tuition fees on average, putting students in private colleges and universities at a great disadvantage. By redistribution of money to the lower risk borrowers, PTPTN could “reward” the students of colleges with low rate of default by raising the ceiling of the maximum loan quantum for all fields of studies. The billion Ringgit question is, will there be the political will to do so?

An article in Education Drive entitled “Clinton hire signals more trouble for for-profits” caught my eye. In this analytical briefing, the author related that the hiring by Hillary Clinton of Rohit Chopra as a part of her presidential transition team would spell more troubles for the for-profit universities and colleges in the USA. The author opined that due to Chopra’s track record of exposing financial irregularities in two significant cases against for-profits (citing Corinthian Colleges & ITT Tech), any institution in the US  with high student loan default rates will be hit if Clinton clinches the presidency in November 2016.  Interestingly, Hillary Clinton’s husband, former President Bill Clinton served as the honorary chancellor of the for-profit Laureate Group’s Laureate International University, better known in Malaysia as the owner of Inti International University and Colleges from 2010 through to 2014. [At the time of writing, Hillary Clinton was set to win the presidency, but we all now know the outcome! But I think the Trump administration, putting the problems of Trump University aside, may also need to take some cues from this & go after the institutions with dubious student loan records.]

The bulk of the defaulters of student loans in the US are indeed coming from the for-profit universities and colleges. The aggressive and misleading recruitment methodology is the main cause coupled with the lower than average employability of graduates of some of these institutions in the US together created the student loan default crisis.

It was reported that till December 2015, Perbadanan Tabung Pendidikan Tinggi Negara (PTPTN) collected only RM7.9 billion from its borrowers which was much lower than the RM15 billion that it had targeted to remain financially healthy. Although PTPTN does not provide the demographic details of its 1.25 million loan defaulters, generally it is an accepted fact that the bulk of these people were students and graduates of public institutions of higher learning (IPTA) as opposed to private institutions of higher learning (IPTS). Although there has been good coverage of the consequences that blacklisted PTPTN loan defaulters  would face in the online press and personal finance sites such as  iMoney,  and even a popular motoring website, the message seems not to have percolated through.

Perhaps the power that be should seriously be considering arresting this problem “upstream”.  That is to make it harder for students from universities and colleges with high default rates to get loan or limit the number or quantum of loans for these institutions. A “league table” of the institutions with the highest PTPTN default rate (and number) should be published to make this policy more transparent. If this is implemented more funds will be channelled by PTPTN to institutions with better loan repayment records among its graduates and former students. This will have the direct effect of forcing all institutions to ensure that they produce employable graduates (who are also not underemployed).

The most heard of excuse from loan defaulters is the fact that they are unemployed or underemployed hence if PTPTN disburses its loan in accordance to the track record of the institutions (in terms of loan default rate), it will reduce the default rate and number accordingly. It is a no brainer really, you should only give out loans to people who have the best chances of repaying and minimise your risk by reducing the exposure to those with a high chance of default.

The billion ringgit question is, will the power that be and PTPTN collectively have the political will to publish this “league table”.

Vocational education: The stepchild of Malaysian education system?

If we are serious about uplifting the overall skill-sets of Malaysians, we cannot afford to go on treating the vocational education sector as the stepchild.

I contributed this article as the editor-in-chief of Han Chiang News, an online news portal set up to give budding journo a platform to practice what they have learned. This article was published on April 15, 2015, but my argument is still the same, TVET (technical, vocational education & training) is still a stepchild! More so in the eyes of the parents who are not well informed of its value and the complicated ways in which TVET is managed by too many government bodies and agencies making it difficult to integrate into the “traditional” academic route for tertiary studies for Malaysian youths. I had gained “Vocational Training Officer” credential in 2016 precisely because I see great future in the TVET sector especially in bridging links between TVET & academia.

The choke of my ceiling fluorescent light gave a “pop” sound and the lighting system failed. Not being that competent in handling electrical work, my wife and I decided that we would need the help of an electrician. If your air-conditioner starts to leak water, you would call the air-conditioning technician. If your car refuses to start, or if your car has a flat tyre would you know what to do?

There are countless aspects of our lives where we would require the skills and mastery of a vocational-trained person to deal with. Yet when it comes to vocational education, there seems to be a stigma in channelling our offspring into the vocational stream. Time and again it has been proven that vocational-trained young persons are more likely to get jobs than their counterparts graduating from colleges and universities with academic qualifications.

According to a recent Jobstreet survey (cited in the National Graduate Employment Blueprint), having “mismatch of skills” was the 4th most cited reason given by employers for not hiring a fresh graduate. Why vocational education and certification (aside from the IT & computer science fields and specialized academic diploma programmes in automotive sector) have not been widely incorporated into the curriculum of universities and colleges is the billion ringgit question! This could potentially solve the high proportion of unemployed graduates each year (over 53,000 out of 180,000 annual cohort of fresh tertiary graduates are unable to get employment). Perhaps  the lack of cross-understanding of the operational aspects of both the academic and vocational education pathways by the respective accreditation agencies is one of the key reasons for the Malaysian education system’s inability to cater to the needs of those coming from the vocational education sector and to embed vocational education into academic studies to enhance university graduates’ employability.

Thus the idea mooted by the Performance Management and Delivery Unit (PEMANDU) of the Prime Minister Department to amalgamate accreditation agencies such as the Malaysian Qualifications Agency and Skills Development Department (Jabatan Perkembangan Kemahiran – JPK) of the Ministry of Human Resources is brilliant. This may drive the creation of seamless learning and qualification pathways for those in the vocational sector to earn diplomas and degrees.

In addition, currently vocational education is provided by no less than 7 Federal ministries/agencies which makes effective coordination amongst these players highly challenging leading to duplication and wastage of resources. Amalgamating the operations of all the public sector training institutions currently under separate agencies into one body while leaving the respective functions such as funding and recruitment of learners to the individual agencies to fulfil their different obligations and objectives is therefore a no brainer.

Currently, some of the negative perceptions among parents and school leavers about vocational education are valid. Except for one case, all the trainees I have encountered so far had chosen the vocational studies route because of their lack of the required Sijil Pelajaran Malaysia grades to be on the academic track.

Thus although the Malaysian Qualifications Framework (MQF) provides for those coming from the vocational education route to cross-over to the academic pathway to earn degrees, in reality few if any of those holding Sijil Kemahiran Malaysia (SKM) vocational education qualifications ever made it to earn their diplomas or degrees from universities or colleges.

Personally I have come across a few SKM holders who technically were able to articulate into engineering diploma programmes in a college. However, their gap of knowledge in mathematics and physics (to a lesser extent, chemistry) was a huge hurdle for them. Thus to make a good pathway for SKM qualification holders into academic route, there must be a good bridging course to make up for the gap of knowledge. Presently, only the publicly funded polytechnics have the capacity and expertise to take SKM holders on to the academic route and places at these institutions are very limited.

[Commentary in 2017: In recent years, the Malaysian Qualifications Agency – MQA did put out a relaxation of admission criteria for SKM level 3 holders and allowing training institutions to provide bridging courses in English, mathematics and the sciences at SPM level to augment the knowledge gap which is commendable. However I feel that MQA should remove the need for SKM level 3 holders to have at least a “pass” grade in SPM and at least scoring a “Credit” grade in one SPM subject i.e. passing Bahasa Malaysia, and History. Instead, I would suggest that the MQA revise this by adding, ” candidates without a pass grade in SPM should show evident of their having taken and passed bridging courses in Bahasa Malaysia, history and one other subject relevant to their desired course of study at diploma level. This will allow for instance, students wishing to pursue at diploma level, mass communication but without a pass grade in SPM to have a chance to pursue the academic route if they take the relevant bridging courses while working on their SKM qualifications. We must not put up barrier but should adopt the “easy to get in but strict on passing out” principle to tackle this issue. Using traditional “academic” requirements will always leave those who have the aptitude to progress to academic route but without a pass grade in SPM stranded.]

In budget 2015, the Ministry of Education was allocated RM56.0 billion, but only RM1.2 billion (or 2.14%) of this was earmarked for vocational education. The higher education sector with about 1.2 million enrolees was allocated close to RM5.0 billion as National Higher Education Fund Corporation (Perbadanan Tabung Pendidikan Nasional – PTPTN) loans.  Yet with over 230,000 enrollees, the vocational sector only received RM200 million as study loans via the Skills Development Fund Corporation (Perbadanan Tabung Perkembangan Kemahiran – PTPK). PTPK’s budget has to cater to not only the study loan needs of school leavers but also those who are already working in industries thus making this resource grossly inadequate to deal with the demand of all who are interested to take on vocational training.

With about 5 times less in funding (RM870 per enrolee in vocational sector compared to RM4,167 for enrolees in the higher education sector), it is not surprising that the vocational education sector are not able to cope with the demand of industries. I think if we are serious about uplifting the overall skill-sets of Malaysians, we cannot afford to go on treating the vocational education sector as the stepchild. The power that be, needs to put its money where its mouth is!

Lock in your tax benefit from SSPN-i saving NOW!

Hands up, if you have heard of SSPN-i?…

Hands up, if you have heard of PTPTN?…

My guess is, if you are a Malaysian living in the homeland, I would be surprised if you do not know what PTPTN is. Perbadaan Tabung Pendidikan Nasional (PTPTN or National Higher Education Fund Corporation) is the body that Malaysian students studying in accredited tertiary institutions apply for funding for their studies. One cannot help but notice news about PTPTN due to its defaulters issues.

Wait! What is SSPN-i? Is it related to PTPTN in any way? You may want to ask.

In fact SSPN-i (Skim Simpanan Pendidikan Nasional – National Education Saving Scheme) is the saving scheme of the PTPTN. It encourages parents to save for their children tertiary education. In fact, since Jan 01, 2012 tertiary students will need to have a SSPN-i account before they are eligible to apply for any PTPTN loans. SSPN-i pays dividend yearly which hovered between 2.5% to 4.25% with the latest figure for 2015 at 4%. Not impressed? But this should not be the main reason for you to invest for your children tertiary education fund in SSPN-i, especially if you are paying income tax. The key attraction to investing in SSPN-i for a tax payer like me is in the RM6,000 maximum amount of tax relief per year for net deposit in your child’s SSPN-i account.

You need not be a mathematics boffin to work out that the RM6,000 tax relief will count for RM1,200 for me as my average tax rate is around 20% (… gee am I revealing too much here?). Look at it another way, I would “gain” RM1,200 because I had deposited RM6,000 in 2016 to my daughter’s SSPN-i account. I would still gain a tax-free dividend of around 3 – 4%, which will be the same as what one would get from a normal bank saving account. 23% return on my investment with 20% “guaranteed” and “immediate” when I compute my tax for 2016 next year is nothing you can get legally anywhere in Malaysia. SSPN-i is also a government guaranteed investment. It is a no-brainer really, that is if you are liable to pay income tax for 2016.

In my case, I have just deposited another RM3,000 today adding to the RM3,000 I had already invested in October 2016 to  maximize my “returns”. As my wife’s business earning for 2016 is very minimal, and we have only one child who is a minor (thankfully our son has graduated from university last week!), we could not take full advantage of the “RM6,000 per child” SSPN-i tax relief. However if you have a dual-income  family where both spouses pay income tax (i.e. each of you earn more than the minimum “qualifying” annual income to earn the privilege to pay income tax), and you have children, you will do nothing better than to raid your children’s piggy bank, saving accounts etc. and invest to the maximum sum.

As the profile image has shown, if you hurry to deposit cash in related bank (I went to Maybank, USJ Taipan), a nice PTPTN staff will be on hand to help you with your SSPN-i if you need one and he/she will give you a nicely shaped “golden egg” as a piggy bank for your child and a very good quality recycle bag for mom or dad. Do hurry, at the time of writing (Dec 22,2016) there are only five more banking days left! If you have already opened SSPN-i accounts, you need not go the bank to deposit, Maybank and CIMB online banking portals also accept your money online. Whatever you do, please beat the Dec 31, 2016 deadline!

Since 2015, there is another type of SSPN-i account called SSPN-i Plus which comes with life insurance (Takaful) coverage. However you can only gain the additional RM6,000 tax relief (in addition to the RM6,000 for SSPN-i) if you have not topped the Employee Provident Fund /Life insurance quota of RM6,000. And for SSPN-i there is some monthly commitment of a minimum of RM50. So for most income taxpayers, SSPN-i may be the better choice. More details are found in this Lowyat discussion forum.

Wishing all my readers Merry Christmas (for those who are celebrating) and a happy and prosperous 2017.

If I score 10 ‘A’s does any one owe me a scholarship?

A student from a remote village in Sabah who did not have the means to attend private tuition classes for key subjects may scores “only” 5 “A+”s compared to a student from Subang Jaya who attended private tuition classes for these subjects who scored 8 “A+”s. As an educationist, I will put my money on the Sabahan student being academically a better student compared to the student from Subang Jaya. Further, because the Sabahan student could thrive without the benefits of tuition classes, I will opine that the chances of this student faltering at university-level studies will be much lower than his/her Subang Jaya counterpart. However by evaluating students based initially on just the number of “A”s scored the odd is stacked heavily against the Sabahan student.

This article is rather long and in its original form was published in two parts in Han Chiang News. It was written in response to the recent news in Malaysia of government bursaries/scholarships students who were promised full funding for overseas universities being told that the coffer does not have enough money and so the power that be had to renege on its promise. I have decided to republish the unedited version here in its entirety. 

In recent weeks the press has highlighted the case of many public service department (JPA) scholars having their collective dreams of a fully paid for undergraduate studies overseas being dashed. The lack of fund was the main cause of the drastic decision by the JPA to reverse course for these students who did spectacularly well in their Sijil Pelajaran Malaysia (SPM – Malaysian Certificate of Education) in recent years. However all were given full financial support for pursuing their studies in local public and private universities.

This case begs the question, “Does society owe a student who has scored straight “A”s in SPM an oversea scholarship?”

While it is disappointing to see talented students who obtain top scores fail to continue their tertiary studies overseas, one must view this situation in a holistic manner. SPM is not an easy public examination for one to score straight “A”s. However those who scored straight “A”s in SPM are not necessary the same people who eventually shine well at university studies. There are many cases of SPM holders with more than 10”A”s who struggled and even tumbled at their undergraduate years.

All of us who have been to college know that there is a big gap between SPM and STPM/”A” levels or equivalent pre-university qualifications. The gap from pre-university to tertiary level is even bigger. Although in general those who did well at SPM would be able to cope with pre-university studies, there are many examples of students with very good SPM and pre-university results faltering at university studies. Thus for a country to commit so much resources to send its citizen to study overseas at this early stage is somewhat of a gamble. The safer bet is in fact what the JPA has done: let these students with great SPM results and pre-university qualifications study for their undergraduate degrees in local public or private universities. If these students turn out not to be what the Chinese described as “Xiao Shi Liao Liao, Da Wei Bi Jia ” (小时了了, ,大未必佳 - being bright at an early age does not necessarily bring success upon growing up), the country can then commit great resouces to send them overseas perhaps on a 2 + 2 model, saving great resources at the same time allowing the selectors to fine tune their selection. Many established private institutions of higher learning have attained great expertise, reputation and network of good overseas institutions to take on this responsibility. For those students who have proven “track records” the country can then commit greater resources to send them for their Master’s or even PhD studies overseas.

Judging someone’s ability to learn well and flourish at university based solely on his/her SPM results is not a very fair method. A student from a remote village in Sabah who did not have the means to attend private tuition classes for key subjects (like Malay, English, Mathematics, Physics, Accounts or Additional Mathematics)  may scores “only” 5 “A+”s compared to a student from Subang Jaya who attended private tuition classes for these subjects who scored 8 “A+”s. As an educationist, I will put my money on the Sabahan student being academically a better student compared to the student from Subang Jaya. Further, because the Sabahan student could thrive without the benefits of tuition classes, I will opine that the chances of this student faltering at university-level studies will be much lower than his/her Subang Jaya counterpart. However by evaluating students based initially on just the number of “A”s scored the odd is stacked heavily against the Sabahan student.

I studied for my G.C.E “A” levels at a state-run technical college in England in early 1980s. The college’s “A” level students were mainly those who had taken the examination before but were repeating for one reason or another. Nearly all of them wanted just to pass. Because of clashing of timetable, in the first year of my “A” level studies I could only take the Applied Mathematics half of the “Pure and Applied  Mathematics” as a part-time-revision-class which had 50% of the hours of the full-time class, covering only 60% of the syllabus. Yet, I was able to score a Grade A for this subject after studying only for 1 academic year. In my case, my “struggle” was recognized by the university selectors and I received two offers to read dentistry in 1982. The lower offer was just any two subjects at grade E or better! Unfortunately, due to my family’s lack of fund, I had to decline both offers despite meeting the minimal requirement easily with one further Grade “A” and two Grad “B”s. Compared to a boarding school student with dedicated school masters and a greater teaching system who scored 4 Grade “A”s at A Levels, I think my achievement under a much less favourable condition would be more reflective of my ability to learn and survive at university level and beyond. Who should you think is deserving of a scholarship to study at university?

To those students who are expecting (or have scored) straight “A”s at SPM and are now at a crossroad as far as tertiary studies is concern, I urge you to take note of the following points:

  1. No one owes you a scholarship just because you scored well. There are a lot of other influencing factors that the selectors of scholarship fund need to consider. You have no right to demand for a scholarship no matter how well you think you have done in your SPM. As a holder of 2 postgraduate scholarships, I can tell you that getting a scholarship is a privilege indeed and not a right!
  2. Because of (1), you must show courtesy under all circumstances. The matured response reported of the recent JPA “Bursary” students’ case in appealing for help rather than “exerting their rights” is the correct approach. You will not get far if you adopt a confrontational approach and project the image of the world owing you something just because you have the talent to score “A+”s!
  3. Have a Plan B, C or even D.
    • Local private colleges provide lots of scholarship opportunities. Most will regularly contribute to the Nanyang Siang Pau’s and Sin Chew Daily’s respective scholarship scheme. However based on this author’s observation, in many years, most of these scholarship awards were not able to find rightful recipients due mainly to the lack of qualified applicants. This shows that there are lots and lots of scholarships out there! Go and grab these!
    • Be flexible in your aspiration. Have an open mind in choosing for at least one other alternative field of studies. Remember Sun Tze’s “Art of War”,  “Zhi Ji Zhi Bi, Bai Zhan Bu Dai” (知己知彼,百战不殆: know yourself and know your enemy, and you will never be defeated in a 100 battles). Often you are your worst enemy in this context! Be realistic. Know your own strengths, weaknesses and interests, match these as far as possible with the different tertiary fields of studies. This will help you to formulate your Plan B, C and even D.  Make use of the knowledge of your school counsellors, talk to your seniors who are already at universities/colleges, attend as many education fairs as possible. Whatever you do, be honest with yourself.
    • Do your research on what scholarships are available early, preferable BEFORE taking your SPM. This will allow you to evaluate which fields of studies or which institutions are your top choices. You can also test out your own ability, aptitude and interest in each of the shortlisted fields. Do not wait till after your SPM results are announced to do this “homework”.
  4. Have an open mind. Not getting a scholarship for overseas studies is not the “be all and end all” episode of your life journey. Remember the saying, “When a door shuts in your face, one will open up somewhere else for you.” In my case, not getting to study dentistry was a blessing in disguise. I found out why I did badly on 3 dimensional vector in Additional Mathematics and why I could not for the life of me figure out the technical drawing of my roommate only when I was already at university reading general agriculture. I have a form of learning disability in spatial recognition. I would have made a very lousy dentist, assuming I could pass in the first place! The “door” which opened for me was indeed my undergraduate studies in general agriculture, through it, I managed to secure two different scholarships for my Master’s and PhD studies! See a counsellor if you are really depressed but get this bout over as soon as possible. Remember the Chinese saying, “ Everybody has something that they were born to be good at (天生我才必有用 ).  Your job is to find that “thing” that you are good at and pursue your tertiary studies in that “thing”. Having good SPM grades definitely will put you head and shoulder above most candidates.

The most memorable line from the highly successful local movie, “Olabola” was uttered by an actress in Cantonese: “Even though I scored As in every subject in Form 5, I am still stuck here as a rubber tapper…..” That was in the 1970s. In today’s environment with close to 500 private institutions of higher learning chasing after students, the protagonist would have secured a scholarship somewhere and PTPTN loan would have covered most of her tuition fees. However, if you are one of those SPM holders with less than 9As and wonder if there is any chance of getting some financial assistance, you will be glad to know that there are still opportunities available to you.

Editor’s Note: Most private colleges have many academic-merits-based and need-based scholarships and bursaries specially designed to help students contemplating tertiary studies due to financial constraints. You don’t need to scored As in every subject in Form 5 to receive a bursary!

Will Corinthian Colleges’s kind of education meltdown happen in Malaysia?

Photograph source:

The final nails are being hammered into the coffin of Corinthian Colleges, once one of the largest for-profit education groups in the USA. The impact of this private higher education meltdown is far and wide. Many of its remaining 16,000 students are left out in the cold, most are shouldering huge personal / education debts with bleak future. Many of Corinthian’s problems that led to its downfall are related to inappropriate management of state-funded education loans to students and over promise of job prospects and pay levels. Can we find similarities in cases of education institutions’ collapse in Malaysia?

If PTPTN can finally get it’s act together (it looks as if it has began the clean-up which it should have been doing in terms of defaulting borrowers management long time ago), will we witness similar higher education meltdowns in Malaysia too?

There are just too many colleges (private, community, public etc.) chasing a Malaysian youth population that is not growing in tandem with their collective capacities. The growth in international students population can help to redress this only a little. Not all the smaller players have what it takes to attract foreign students!

Should PTPTN now also start honing on errand colleges and universities which have been over promising its students with job prospects? Let’s be fair on this, PTPTN should include every institution, both private and public where the most loan defaulters have come from. It also owes the citizens of Malaysia an explanation on why it had decided in November 2014 to whack 15% from the private college students’ PTPTN loan amount while taking only 5% from those in the public institutions of higher learning. This reduction has already showing its impact on the enrollment figures of many private institutions relying heavily on PTPTN loan to fund their students (does this ring a bell?….think Corinthian!).

Consolidation of the higher education industry of Malaysia was called for by some politicians recently. But these people may not have a full understanding on how the higher education industry works and they have no idea of the complexities that the act of consolidation (along the idea of banks mergers) would entail. Colleges and universities are not like banks, the “products” are all very different, the pricing systems and delivery schedules are all unique to individual institutions. It would be easier to let “sick” colleges die than to “cross infect” the healthier ones! No sane edupreneur will be willing to buy into someone else’s huge debt!

With more stringent entry requirements for private colleges and universities set to come into effect in 2016, and the possibilities of PTPTN getting tougher on institutions which produced the largest number of bad debtors, there is a huge storm that the higher education industry as a whole and the private sector in particular are riding into. The “Corinthian Meltdown” may yet to be witnessed in Malaysia!

I for one will not be buying any education stocks for now!

(Declaration: I do not hold any direct shares in any of the 4 public listed education groups in Bursa Malaysia!)

Punishing new student loan borrowers for the sins of their predecessors

Punishing new borrowers for the “sins” committed by their predecessors is akin to punishing a child for the crime committed by his father….unfortunately that’s what PTPTN is doing to new student loan borrowers.

On November 6, 2014, I received a phone call from David Lee, Editor-in-Chief of Focusweek, the sister publication of Focus Malaysia around noon. David was keen to have a full article written on the announcement made by the National Higher Education Fund Corporation (PTPTN) a day earlier where it had reduced the amount of loan that new borrowers would be getting from November 1st, 2014. Students from private institutions of higher learning will be hardest hit with a massive reduction of 15% in the maximum loan quantum, their public institutions of higher learning counterparts got a 5% corresponding reduction. The mean-testing criteria were further tightened so that only borrowers from low income families would stand to get the full loan.

I was very honoured by this request, but there was one caveat: I needed to get the story written and submitted by lunchtime the next Monday, November 11,2014. This gave me about 5 days to do the job. Luckily for me, being a avid follower of the PTPTN saga, I had in my “collections” a great deal of press articles and other data that would allow me to start the job. But I still had to do a lot of desk research and getting the relevant data was the most time-consuming.

Working frantically for the next few days and with the editorial inputs from David and his team, we managed to get this front cover story on the November 15, 2014 edition of Focusweek completed. The followings is an excerpt of the full article that was carried in on December 8, 2014.

The full article also covered the unfairness of reducing 3 times higher the reduction in maximum loan (at 15%) for borrowers in private institutions of higher learning compared to their counterparts in public institutions. Since the private and public institutions cater for just about equal number of students, why the heavier “punishment” on the private sector. What I could not find was the data from PTPTN which show who are the main loan defaulters. If the majority are from the private institutions then PTPTN might have justifications for the more severe treatment, but personally, I doubt this is the reason. I also covered the implications on the 15% maximum loan reduction on the private college and universities enrollments where I think those institutions struggling financially will see these austerity measures hitting them hardest. I think a further round of consolidation of the private higher education industry is going to take place in the next few months when the impact of this loan reduction is felt on the new students.

My key quotable quote: Punishing new borrowers for the “sins” committed by their predecessors is akin to punishing a child for the crime committed by his father.


PTPTN punishing the wrong people

PETALING JAYA: The dire predictions have come to pass. Less than three months ago, The Heat newsweekly wrote of a looming student loan crisis at the National Higher Education Fund Corporation, marked by an almost RM50 billion outstanding student loan account and an alarmingly high level of graduate joblessness or underemployment.

The report referred to the situation as a “ticking financial time bomb” and ques­tioned whether the PTPTN (the Bahasa ac­ronym for the corporation) could continue to use kid gloves on the defaulters.

The warnings seem to have been heeded, although it’s far too late. On Nov 5, PTPTN chairman Datuk Shamsul Anuar Nasarah announced a measure that was once rejected by the Cabinet – listing loan defaulters in the Central Credit Reference Information System (CCRIS).

The first stage would involve 173,985 borrowers who had not started financing their loans totalling RM1.23 billion, three years after graduating. Other defaulters will follow in succeeding stages. Being listed under CCRIS would affect the borrowers’ credit worthiness and make it difficult for them to get bank loans.

While this falls within the ambit of nat­ural justice, another announcement by the PTPTN has fast turned into an unpopular decision that invites controversy.

This has to do with the decision to tighten the eligibility criteria for borrowers and to reduce the loan percentage by 5% and 15% for borrowers from the public institutions of higher learning (IPTA in Bahasa) and private institutions of higher learning (IPTS) respectively.

Only borrowers whose families are receiving government handout in the form of 1Malaysia People’s Aid or BR1M would be eligible for 95% PTPTN loan. Borrowers coming from families which do not qualify for BR1M and with household income of below RM8,000 would be eligible for 75% PTPTN loan while those whose families earn more than RM8,000 will only be eligible for 50% PTPTN loan.

It was reported that 558,475 PTPTN borrowers did not make a single instalment payment, causing their collective debt to balloon to RM4.3 billion. Although the PTPTN is putting 173,985 of them into CCRIS, one wonders why the rest can’t be made to face the same fate as well. It is crucial to cast the net far and wide, to generate a payment schedule that would keep the fund afloat.

Other decisions taken beg some thought. The government has decided to convert the PTPTN loans of high achievers who scored first class honour degrees to scholarships and this would benefit 22,150 borrowers as at end September at a cost of RM603.1 million.

This is an excerpt of an article first published in the Nov 15, 2014 issue of FocusweekThe cover picture was an image taken from the front cover of Nov 12, 2014 edition of Focusweek.

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Comparing Malaysia’s student loan crisis with that of the USA

Malaysia has its own version of student loan crisis. This article gives an in-depth analysis of the crisis, identifies great gaps in data & compares Malaysia’s case with that of the USA.

My article entitled “Looming student loan crisis” was published on August 23, 2014 in the now defunct print weekly, The Heat. An edited version of the same article also appeared recently in Theantdaily which was also syndicated by Malaysia Today.

The idea for this article came to me in late June 2014 when I read about the news related to the National Higher Education Fund Corporation (PTPTN), especially related to defaulters and the fact that 50,000 new applicants to PTPTN loans may be turned down due to the lack of fund because of the high rate of defaults.

The first version of my article was deemed to be too “academic” with too many facts and figures and hence I went back to the drawing board to work on the second version which was accepted for publication. I have reviewed and edited the first version which is published here. I shall leave it to the wisdom of my readers to judge if this version (which differs substantially from the one published in The Heat) provides a deeper analysis of the issue of student loan crisis in Malaysia and its analogy with the same issue in the USA. 

In November 2014, PTPTN announced a drastic reduction of loan amount to new applicants which trimmed 5% off the maximum loan quantum for borrowers from public institutions of higher learning but levied a massive 15% reduction in the maximum amount of loan for those studying in private institutions. The mean-testing criteria have also been tightened up further. These proved that my prediction in August 2014 was right on the bull’s eye!


Malaysia’s looming student loan crisis

In 2012, USA’s outstanding student loan shot over the psychologically important US$1.0 trillion mark. In March 2014, US News reported that this figure has breached US$1.1 trillion. This is significant because by 2012, the total amount owed by United States’s student loan borrowers had exceeded the country’s citizens total credit card debt. Many financial experts are now saying that the US student loan crisis is getting to the dimension of the sub-prime mortgage crisis of 2008. With a total of over 37 million borrowers holding outstanding student loans, 6.8 million (or 18.4%) of whom being defaulters who collectively account for US$95.9 billion it is no wonder that alarm bells are ringing in the USA.

Table 1: Comparison of student loan data between Malaysia and the USA
Malaysia USA
1 Total amount of student loan disbursed (1997 to 2014) RM54,510,000,000 N/A
2 Total amount of outstanding student loan (2014) RM49,390,000,000 $1,100,000,000,000
3 Amount of student loan in default RM1,300,000,000 $95,900,000,000
4 % of total loan in default [(No. 5 / No. 4)*100%] 2.63% 8.72%
5 Total number of borrowers (1997/2013) 2,390,000 N/A
6 Total number of borrowers still with outstanding loan (2013) 1,240,000 37,000,000
7 No. of defaulters (2014) 183,000 6,800,000
8 % of borrowers who defaulted (2014) [(No. 7/ No. 6)*100%] 14.8% 18.4%
9 Underemployment rate of graduates 40% 44%
10 Repayment rate (2012) (RM7.83 billion due, RM3.48 collected) 49.07% N/A
11 Amount of total loan recovered (Mar 2014) RM5,120,000,000 N/A
12 Repayment collected (2011) RM737,000,000 N/A
13 Repayment collected (2012) RM800,470,000 N/A
14 Repayment collected (2013) RM1,200,000,000 N/A
15 Average debt owed per defaulter (No. 3 / No. 7) RM7,104 $14,103
16 Average amount of loan taken by each borrower (No. 1 / No. 5) for Malaysia; (No. 2 / No. 6) for USA RM22,808 $29,730
17 Total National Debt (July 2014) RM543,236,000,000 $17,806,000,000,000
18 % of PTPTN outstanding loan as national debt [(No. 2 / No. 17)*100%] 9.09% 6.18%

If we take a look at the statistics for Malaysia’s National Higher Education Fund Corporation (PTPTN) loans and compared these with the equivalents in the USA (Table 1), there are worrying indications that Malaysia is heading the same path as the USA towards student loan crisis. Between 1997 and 2013, PTPTN had provided RM54.51 billion loan to 2.39 million borrowers. To put things into perspective, the total amount of outstanding PTPTN loan currently is around RM49.39 billion and every year PTPTN disburses around RM5.0 billion to over 200,000 borrowers. The best year of loan repayment that PTPTN has recorded was 2013 at RM1.2 billion. In simple arithmetic, discounting defaulting loans, the total outstanding PTPTN loan will grow at least RM3.8 billion each year. In comparison, the dividend paid by Petronas to the Malaysian Government has been around RM30.0 billion each year (for 2013 it paid RM27.0 billion). Thus what is owed to PTPTN is about RM20.0 billion more than what the Government of Malaysia receives each year from Petronas.

The average amount owed by undergraduate borrowers in Malaysia, at RM22,808 is comparable to the USA’s figure of US$29,400 if one takes into consideration of the much lower cost of higher education in Malaysia.

Table 2: Statistics of PTPTN Borrowers: the unexplained reduction in numbers
Item Number
1 Total number of borrowers (between 1997/2013) 2,390,000
2 Total number of borrowers still with outstanding loan in 2014 1,240,000
3 Number of borrowers who have settled their loans (based on calculation: No. 1 minus No. 2) 1,150,000
4 No. of defaulters (2013) 412,245
5 No. of defaulters (2014) 183,000
6 Reduction of defaulters between 2013 & 2014 (No. 4 minus No. 5) 229,245
7 Number of borrowers actively servicing their loans (2014) 956,018
8 Number of borrowers unaccounted for in 2014 (after deducting no. of known defaulters, active borrowers from total no. of borrowers with outstanding loans) (No. 2 minus No. 5 minus No.7) 100,982
9 Amount of loan repaid by borrowers in 2013 RM1,200,000,000
10 Total amount of loan recovered (up to 2014) RM5,120,000,000
11 Amount of loan attributed to the reduction in number of defaulter between 2013 & 2014, assuming the average owed is the same for the 2014 defaulters, RM7,104. (No. 6 * RM7,104) RM1,628,516,393
12 Estimated amount owed by the unaccounted borrowers, assuming the average owed is the same for the 2014 defaulters, RM7,104 (No. 8 * RM7,104) RM717,358,470
13 Total amount of loan from unaccounted borrowers (based on average default amount per defaulter in 2014) (No. 11 + No. 12) RM2,345,874,863
14 Amount of loan attributed to the reduction in number of defaulter between 2013 & 2014, assuming the average owed iby individual borrowers in 2014, RM22,808. (No. 6 * RM22,808) RM5,228,512,531
15 Estimated amount owed by the unaccounted borrowers, assuming the average owed by individual borrowers in 2014, RM22,808. (No. 8 * RM22,808) RM2,303,150,134
16 Total amount of loan from unaccounted borrowers (based on average owed per borrower in 2014) (No. 14 + No. 15) RM7,531,662,665

With 14.8% (or 183,000) of the 1.24 PTPTN borrowers holding outstanding loan being defaulters (a higher figure of 19% was reported recently), the default rate is fast approaching the US level. Although only 2.63% of PTPTN’s outstanding loans (or RM1.3 billion) are in default, which is about three times less than that of the USA (at 8.72%) the confusing data provided by the relevant authorities in Malaysia at different times points to a possibility of a much higher default figure (as shown in Table 2). Based on data released to the press in April 2014, there was a dramatic reduction in the number of defaulters from 412,245 in 2013 to 183,000 in 2014, a staggering fall of 229,245 borrowers. No explanation has been given to this fall in defaulters. Basing on the average amount owed by defaulters in 2014 of RM7,104, these 229,245 “rehabilitated” borrowers should account for around RM1.63 billion of outstanding loan and the collected amount (assuming that each borrower opted for the 10 years tenure, excluding interest) should be at least RM163 million. If we base our calculation on the average amount owed by a borrower in 2014 of RM22,808, these figures shall change to RM5.23 billion and RM523 million respectively.

Accordingly, there is also another discrepancy in the figures given relating to the number of borrowers actively servicing their loans. In April 2014, it was revealed that there were 956,018 borrowers active in repaying their PTPTN loans and the total number of borrowers with outstanding loans was given as 1.24 million. If we take away from this 1.24 million people the number of defaulters and the recorded number of borrowers actively repaying, there are strikingly 100,982 borrowers unaccounted for. Granted some of these people could have been the top students with first class honours degrees whose loan have been converted to scholarships, in reality producing over 100,000 first class honours graduates who are also borrowers in one year is stretching one’s imagination a bit too far. These 100,982 unaccounted borrowers could be responsible for between RM717 million to RM2.30 billion of loan, if we assume they owe an average of between RM7,104 to RM22,808 (based on the borrowers data for 2014 in Table 1).

Hence the total unaccounted borrowers collectively could owe PTPTN between RM2.35 billion to RM7.53 billion, either of which is a very huge number that dwarf the loan repayment collected in 2013 of RM1.2 billion. Somehow this fact has escaped the attention of the Auditor General office which has uncovered system problems in PTPTN but this alone could not explain the huge number of borrowers unaccounted for.

The amount of student loan owed and the default rate are tied fully to the employment status of the borrowers. In the USA, it was estimated that around 44% of graduates are underemployed which means that they are not in jobs that are relevant to their training and thus not earning sufficiently. In Malaysia, the figure of 40% underemployment has been given for fresh graduates. Hence being underemployed and therefore not earning one’s full potential is the most crucial factor leading to student loan default. Will this lower pay affect the repayment of PTPTN loans? Will this be the trigger to higher level of PTPTN loan default?

PTPTN will need at least RM5.0 billion per year to cover the loan demand of Malaysian students. Assuming that the collection of repayment stays at least RM1.2 billion as per 2013 data, and the default amount stays at 2014 level of RM1.3 billion, the RM5.0 billion will not be enough to cover the needs of new students. Will we see a cap to the amount of PTPTN loans?*  Will the private higher education sector bear the brunt of the cut in PTPTN loan funding? How will the private institutions, especially those with high reliance on PTPTN funding for their students fare?

The percentage of national debt accounted for by student loan debt is about 6.18% for the USA. For Malaysia, the figure is about 9.09% of total national debt. Thus if the USA, at 6.18% of national debt is close to having a financial crisis, how will Malaysia fare with closer to 10% of national debt accounted for by outstanding PTPTN loan?

With all these indicators, one cannot help but surmise that there is indeed a looming PTPTN loan crisis in the same dimension as that of the USA. The sooner that every stakeholder recognizes this as a pressing issue, the faster can a plethora of solutions be implemented.

*This article was written in mid July 2014. In fact in early November 2014, PTPTN has announced a 5% reduction in loan amount for borrowers from public institutions of higher learning while their private institutions counterparts have to endure a massive 15% reduction in loan amount. More stringent mean-testing measure was also announced.

The profile of student loan borrowers

US News reported in March 2014 that although the bulk of the loan in the US (60%) are for borrowers taking undergraduate courses, a worrying trend is that the remaining 40% is owed by graduate students who account for only 16% of the number of borrowers. The average owed by 70% of those graduating with an undergraduate degree in 2012 was US$29,400, in contrast the amount owed by the average graduate student was US$57,600 with many facing debts of US$100,000 or above.

In contrast, most Malaysian graduate students are only eligible to apply for PTPTN loans if they enroll in public universities and a handful of private universities.  In addition, different levels of financial support ranging from full scholarships at public and private universities, various government scholarship schemes and jobs as research assistants have diminished the reliance of graduate students on PTPTN. It can be assumed that the bulk of the borrowers of PTPTN loans are for undergraduate studies. An attempt to obtain the percentage and amount owed by borrowers pursuing graduate studies has not been successful. The financing of graduate studies by working adults in Malaysia also traditionally rely on EPF withdrawal, commercial bank loans or own savings. Only those enrolled for part-time studies at public universities and a limited number of for-profit institutions are eligible for PTPTN loans.


What the US experts have predicted regarding student loan crisis

  • There might be a cap to student loan guarantee by the US government. This would spark off a crisis mirroring the sub-prime mortgage financial crisis of 2008. With difficult availability of student loans, colleges, especially the for-profit institutions will find it hard to fill up seats, collapse of the higher education industry could occur.
  • There will be diminished economic productivity from young graduates in the long run as they are spending higher percentage of their income to service student loan debt. This coupled with the 44% US graduate underemployment rate means that the income level of a significant number of borrowers may not be sufficient to cover their student loan repayment fully.
  • The spiraling US college tuition fees over the period between 2001/2 to 2011/12 have seen public universities tuition and other fees rose by 40% and that of private institutions rose by 28%. This coupled with the ready availability of student loan have increased the amount of debt held by each US borrower.
  • For-profit US institutions have only 13% of the total population of students but account collectively for 31% of student loan. Their students also have higher default rate of 22% compared to those studied public institutions. 72% of for-profit institutions produced graduates who earn less than the average high school dropouts. This is a reflection on the market perception of the quality of some of these US for-profit colleges. Many have significant reliance on government-backed student loans to sustain their operation. Corinthian Colleges which has 72,000 students received US$1.4 billion of its US$1.6 billion revenue in 2013 from government funded student loans. It has to sell off all its 85 of its campuses and closing down 12 because of the trouble with government funded student loan issues.

The majority of the predictions above regarding US higher education institutions, especially for-profit colleges may have similar reflections in Malaysia. A PTPTN loan crisis will definitely result in the tightening of the rules regarding the eligibility criteria of borrowers. A squeeze of funding source of PTPTN (coupled with high default rate and relatively low repayment collection) may also curtail the number of for-profit institutions and the type of study programmes that qualify for PTPTN loan. This will lead to a second wave of consolidation of not only the number of for-profit institutions but the types of programmes (as did the tightening of the funding rules regarding nursing programmes a few years ago which resulted in the collapse of a number of smaller private nursing colleges). There is no indication that graduate from for-profit institutions in Malaysia are more prone to defaulting their PTPTN loan. This could be due to the cap in the amount that PTPTN imposes on each type of study programme. There is also no indication that graduates of for-profit institutions earning less than their public university counterparts as shown in the US.

One aspect of the US higher education scene that may not play out in Malaysia is the spiralling of tuition fees. This is a combination of market condition and the way the regulatory authorities and funding bodies exerting tight control over the tuition fees that for-profit institutions are allowed to charge in Malaysia. Additionally, public institutions’ tuition fees level is determined by the Malaysian Government with most degree programmes receiving 90% or more in subsidies to keep these fees low. With PTPTN having a cap on funding for different degree programmes at for-profit institutions coupled with the fierce competition  in the private higher education sector means that most private players (with the exception of the market leaders such as Taylor’s University and Sunway University which can command higher than market rates) will price their tuition fees around the PTPTN capped levels to stay competitive.Thus dramatic rise in tuition fees is not an issue in Malaysia.

Comparison of some effects on student loan defaulters in the USA & Malaysia:

  • US education debt cannot be eased even if one dies or files for bankruptcy. In contrast, PTPTN loan scheme includes loan insurance to cover the loan in the event of the death of the borrower but bankruptcy may not be covered by insurance. PTPTN in 2011 declared that although it has the right to declare defaulters with loan that is over RM30,000 as bankrupts, it has decided not to pursue this route to recover its fund.
  • Since 2004, student debts in the US has increased by 56.8% per person on average but the average salary for young people in USA has in fact dipped by 10%. Fresh graduate salary in Malaysia actually grew by 8% in 2013 but the starting salary is still low at RM2,400 to RM2,800. A fresh medical graduate from a for-profit medical school with a RM300,000 loan for tuition fees will find it hard to pay off the study loan with a starting salary of around RM3,000. But PTPTN’s cap for medical degree programme is RM30,000 per year or RM150,000 for the programme. However, most PTPTN loan borrowers, especially those who have graduated from public universities who are employed should be able to service their study loans. These salary data from Malaysia was collected for fresh graduates entering jobs relevant to their fields of study. The 40% and 44% underemployment of fresh graduates in Malaysia and the USA respectively may limit those trapped in this circumstance to service their student loans adequately.
  • The 6.8 million student loan defaulters in the USA will find that their credit rating drops drastically, they may not be eligible for government jobs. They may not even get their transcripts (which are increasingly being demanded by employers) for them to apply for jobs.  While Malaysian for-profit institutions practice the same withholding of transcripts for graduates who have outstanding bills, they are not bound by any regulation to do the same on behalf of PTPTN to make loan defaulters pay up. PTPTN has been directed not to blacklist a large proportion of the defaulters with credit agencies but it is interesting to see if more defaulters do not pay up will this be one of the measures implemented. [In November 2014 PTPTN did announce the listing of loan defaulters in the credit agency’s blacklist which have since saw an increase in repayment rates by borrowers]
  • Some states in the USA will disqualify student loan defaulters from professional licences such as nursing, some will voke driving licences of defaulters. In Malaysia, PTPTN may not have the power to do likewise but it can work with professional organisations such as the Malaysian Medical Association, The Nursing Board, Institute of Accountants, etc. to come to some arrangements to bar loan defaulters from registering with the relevant boards.

Remedies for treating the problem of student loan defaults:

There have been many diverse opinion on what should be done to alleviate the problem of student loans default in the USA. Student loan “forgiveness” is one of the remedial actions taken in the USA. This has been implemented since 2007 where if a borrower fulfills certain conditions he/she pays back the loan according to how much he/she earns and not how much he/she owes. There is a cap of US$57,500 that can be forgiven in this way but those taking up graduate studies are not subjected to any cap. The cost of this “loan forgiven” scheme initially cost the US Government US$1.7 billion but has since ballooned to US$7.6 billion by April 2014.

Since 1965, the US Federal government have been providing Pell Grant to needy student to enable them to pay for college education. The amount of Pell grant that an eligible person can obtain in 2014 is US$5,730 for a maximum lifetime value for 6 years (i.e. US$34,380). In 2014, Pell grant benefited 9 millions US citizens at a cost of US$33.0 billion. Some believe that extending the Pell grant by relaxing some of the mean-tested qualifying criteria may be one of the remedies.

In comparison Malaysia’s PTPTN does have a “loan forgiven” scheme for borrowers who scored first class degrees to convert their entire loan to scholarships. What this scheme costs so far and how many have been benefited are not available at present. [as of September 2014, PTPTN has converted the loans of 22,150 high achieving borrowers to scholarships, costing the fund RM603.1 million]. However there has not been any other criteria set that will trigger “loan forgiven” by PTPTN. Perhaps “loan forgiven” can be considered for cases whereby certain categories of borrowers for instance those with medical, allied health science or teaching qualifications can be enticed to serve for an extended period in remote areas of Sabah or Sarawak in return for full or partial “loan forgiven” scheme.

There is also an equivalent of Pell grant in Malaysia in the form of Majlis Amanah Rakyat (MARA) bursary and scholarships that it has been disbursing for decades. However MARA scholarships and bursary are provided only for the bumiputera community and are not universally available depending on the financial neediness of the applicants as in Pell grant’s case. Perhaps the Malaysian Government should take a look at Pell grant to ensure the very poor have equal access to higher education?

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Contagion effects of for-profit colleges woes?

On the day that Americans celebrated the country’s independence day, The Huffington Post reported that one of the largest for-profit college groups in the USA, Corinthian Colleges was heading for disaster. The crux of the matter was due to Corinthian’s over reliant on federal government-backed study loans to the bulk of its 72,000 student loan which was effectively pulled back by the authority. For 2013 Corinthian had a revenue of US$1.6 billion, US$1.4 billion of which was attributed to federal government-backed study loans. 85 out of over 100 of Corinthian’s campuses over 25 states are now up for sale with another 12 slated for full closure.

Although Corinthian gave reassurance to affected students that their studies would not be disrupted, the damage to the confidence of the market is irreparably done.  Corinthian’s case has not been helped by a judge ruling that it does not need to disclose its financial woes in any of its advertising materials. This fuels speculations that there must be more that meet the eyes as far as Corinthian’s predicament is concerned.  It was disclosed that Corinthian’s case may just be the tip of the iceberg, another for-profit group, ITT Education Services Inc. is set to lose some of its federal government funding.

Just 10 days later, a routine audit and review by the U.S. Department of Education (DOE) on the largest for-profit education group, Apollo Education Group which, according to Apollo was a routine procedural matters was read by the market, in light of the Corinthian case with “controlled alarm“.

Are we seeing a contagion effect on the for-profit higher education sector in the USA? Will this contagion effect due to the pulling back and tightening scrutiny of for-profit players in the USA have a “mirror” image if PTPTN (Malaysia’s National Higher Education Funding Corporation) copies some of the measures taken by the USA’s DOE?

So far PTPTN has been concentrating on its efforts in the recovery of study loans and it has not been paying too much attention on the education providers. It is surely highly beneficial if PTPTN performs periodic auditing and review of all the education providers, both public and private to ensure that the study loans provided are spent prudently and achieving their intended purposes.

PTPTN can also collaborate with other agencies such as the Malaysian Qualifications Agency which oversees the quality of teaching and learning of higher education providers to ensure that their respective databases can be cross-referenced.

The yearly amount of RM5.0 billion injected to the entire Malaysian higher education industry as student loans. This is the fuel that sustains the bulk of the for-profit institutions of higher learning in Malaysia. More stringent reporting and auditing procedures should be levied on all institutions of higher learning whose students are receiving PTPTN loans. Institutions, whether public or private with high percentage of PTPTN loan defaulters should be made accountable and if needed, PTPTN should do like the DOE of USA, pull funding from these institutions accordingly.

If we let the status quo persists, the student loan contagion effect of the USA will reach our shores sooner than you expect!

Footnote: Dr. Chow has an opinion piece on his column in the weekly, The Heat dealing with his experience in repayment of study loan and why he sleeps soundly each night as his conscience is clear, he paid back all he had owed! 



July 20, 2014: It seems that the contagion effect has started in the USA. Another for-profit education group is under the spotlight. This time, DeVry University is being investigated by New York Attorney General.