Study Loan: Assisting or Torturing?

Written by Amirah Sohaimi

Have you pay off your student loans?

In the United States, student loans are the second largest debt form and constitute about 10.6% of all consumer debt. CNBC, a recognized business news channel reported that now 44 million Americans hold a total of more than 1.3 trillion USD in student loan debts.

The amount of student loan outstanding amounted to US $ 1.1 trillion (RM3.49 trillion), equivalent to about 6% of national debt. Financial experts in the United States predict that this will spark a financial crisis on the scale of the subprime mortgage crisis in 2008. The crisis is caused by uncontrolled loans for property, even to those who cannot afford it.

A news coverage on NST reported that less than half (46.6 percent) borrowers pay their loans and a total of RM8.49 billion (USD2.081 billion) remains unpaid in 2015. With low wages and rising cost of living, many new graduates have income that is less than RM3, 860 per month and thus, they do not have sufficient income to repay the study loan, whether discount being offered or not.

Actually, the problems faced by the United States are similar to what Malaysia faces, perhaps more in some ways. One of the problem is that 40% of graduates are unemployed, and without employment, these young people cannot afford to repay their loans. Those who do may get help from their parents. Excellent student loans represent the amount of loans that have been issued to the borrower. This figure includes bad debts or loans where borrowers have failed to repay their loans.

NST mentioned that to help these students, the government has come up with several loan settlements. In the United States, the Education Department will provide a pardon based on how the borrower’s income is compared to the income of the graduates from the same vocational program. If they earn less than 50 percent of their colleagues, the Education Department will forgive their 100 percent loan. If the borrower’s income is comparable, they will receive less help.

However in Malaysia, PTPTN should not be expected to continue lending student loans with poor loan recovery performance. This is because it requires at least RM5 billion annually to meet the needs of the borrower – both existing borrowers who are still studying and new borrowers going to institutions of higher learning for the first time.

Education is very important. We should not portray that study loans are burdensome as it can weaken the spirit of the young generation who want to learn. We need to stop shouting about the common crisis and see how we can really help students access higher education and let’s impose solutions that improve access for low-income students rather than scare them off.

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