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Educated but colonise by debt: Understanding the notion of student loan debt

“Education is the most powerful weapon which you can use to change to change the world.” There are about 8400 quotes about education on goodreads.com, which most of them emphasising the significance of education not only in one’s life but as well as the community, state, country and even the world. In today’s competitive Generation Y (those born between the 1980 and 2000), higher education is essential to compete in the market job or in simpler words: higher qualification, better job prospects, higher pay grade.There’s a rapid expansion of the higher education system of second half of the 20th century in America. Among adults aged 25 or older, rates of college attendance have risen from 22% in 1971 to 57% in 2012, and nearly a third of adults had completed at least a bachelor’s degree in 2012.1 This increasing access to higher education is required to help workers keeping pace with a changing economic structure in which low-skilled, well-paying blue collar jobs are disappearing and high-skilled white collar jobs requiring advanced education are increasing.2 

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Although this education is a good investment for students and society at large, it comes at an expensive price, and it has become increasingly necessary for young adults relying on student loans to fund their education by borrowing against their expected future earnings. The chief executive officer of Asian Institute of Finance (AIF), Dr Raymond Madden states Generation Ys as the most educated generation but accrue debt even before they have their own professional careers.3  Student loan debt has climbed dramatically in recent decades as the number of borrowers, balance per borrower and total amount of outstanding debt increased rapidly. United State’s outstanding student loan shot over the psychologically important US$1.0 trillion mark in 2012 and 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.4 In Malaysia, the statistics for Malaysia’s National Higher Education Fund Corporation (PTPTN) loans show worrying indications that Malaysia is heading the same path as the United States 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).5 Thus what is owed to PTPTN is about RM20.0 billion more than what the Government of Malaysia receives each year from Petronas.

Categories: Finance


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