How to abolish student loans

Within the context of strategic preparation for the forthcoming general election (GE16) as the Pakatan Harapan convention season concluded, PKR Youth chief Kamil Munim's proposal to write off PTPTN debts for the most impoverished and low-income borrowers caught my attention. This concept can be expanded into a comprehensive plan to eliminate student loans entirely, broken down into three straightforward steps.

The initial step involves halting the issuance of new debt, which can be accomplished by transitioning from PTPTN loans to a fixed grant system. This grant could be presented as vouchers enabling students to select their desired degree program at any university, thus fostering a competitive marketplace where universities must vie for students based on the quality of their programs and the overall student experience.

Universities with premium programs could offer additional funding above the voucher price, while those with basic offerings would attract students through value indicators like student experience or outcomes. Private institutions would likely welcome this change as it would provide them with a dependable, guaranteed revenue stream and reduce their marketing costs and discounted "scholarships" aimed at meeting recruitment targets.

The second stage centers on addressing existing PTPTN borrowers. Those who have fulfilled their PTPTN loans would be unaffected, while those with outstanding balances could be given the option to settle or implement regular, mandatory salary deductions that would cease upon the completion of their loans. This approach, akin to a graduate tax, could be structured as tiered deductions based on salary levels.

Certain groups, such as educators or healthcare professionals, could even be granted exemptions altogether. The final step entails financing the PTPTN grants. PTPTN disburses annual loan disbursements ranging from RM3 billion to RM3.5 billion, representing less than 1% of federal government operational expenditure or the cost of a single month's petrol subsidy.

Remarkably, the net expense would be even lower as the government already subsidizes interest payments on PTPTN loans by at least RM1 billion annually, providing periodic bailouts when repayments fall short. Moreover, the PTPTN eKasih free education scheme, the first-class student fee waiver, and funding for STEM subjects contribute nearly RM800 million to higher education subsidies.

Consequently, within the existing budgetary plans, it is conceivable that the government could abolish student loans and fund free higher education directly as early as Budget 2027 in October. With PTPTN administering this system and continuing its Simpan SSPN (Skim Simpanan Pendidikan Nasional) scheme, the government could potentially generate a net profit, considering the accumulated RM24 billion in deposits and a recent 4.1% annual dividend payout totaling RM506 million, effective as of December 31, 2025.

This innovative transformation of PTPTN into a national higher education trust fund could serve as a novel funding mechanism for the higher education ecosystem, aligning with its original mandate. If the unity government fails to seize this opportunity in Budget 2027, a future party may capitalize on this progressive, universal policy targeting all Malaysians, thereby potentially securing significant votes from current and future students and their families. The presented opinions are my own, and they do not necessarily reflect the perspectives of FMT.