Refocusing the PTPTN debate

The Nut Graph

AT a ceramah on 4 June 2012, Opposition leader Datuk Seri Anwar Ibrahim told students to stop repaying their National Higher Education Fund Corporation (PTPTN) loans. Once the Pakatan Rakyat (PR) comes to power, Anwar said, it would abolish the loan scheme and provide free tertiary education.

The very next day, the PTPTN froze loans to new students at the PR-run Universiti Selangor (Unisel). Although the freeze was lifted a few days later, the weaknesses of the PTPTN remain. So does the strongly partisan nature of the debate.

This argument will not get far until we move beyond the polarised back-and-forth between maintaining the PTPTN and abolishing student fees. I would like to add my voice to those calling for attention to broader issues: a wider range of policy solutions to higher education financing, and more thorough consideration of our national educational aspirations.

The mess of higher education funding

Malaysia is not alone in grappling with education policies. In Quebec, sustained protests against proposed university fee hikes resulted in hundreds of arrests, thousands of student walkouts and stalled negotiations between the government and student leaders.

We are hardly the only country facing a crisis in tertiary education funding. The economics of higher education are, to put it technically, a mess. Should we charge interest on student loans, or should we subsidise the cost of borrowing against inflation? Do the financial returns from university degrees accrue to the national economy, or to private purses? If the latter, should the public fund them? And what about all the unemployed graduates?

It will take a combination of economists, policy experts, and public consultation to decide those tradeoffs. One place to look for answers is other countries’ models of higher education.

Consider the United Kingdom. University funding has been a contentious issue in the UK since the 1998 introduction of tuition fees to cover budgetary shortfalls. In 2010, a proposed rise in tuition fees resulted in a wave of protests and 153 arrests.

Although the fee hike will be enforced in the next academic year, in 2010 it faced a key challenge from the graduate tax. Endorsed by the National Union of Students and considered by the coalition government’s Browne Review, the graduate tax model replaces university fees and loans with a system of additional tax obligations for the first 20 years after graduation.

While the graduate tax has the benefit of providing education for free at the point of delivery, many argued that it would distort incentives negatively. Since graduates who earn more would have to contribute more to the university fund, some argued that it would dim their motivation to work. Others believed it would encourage young graduates to work abroad in order to avoid the tax.

Another argument against the graduate tax pointed to the American system: while the market-based competition of higher education in the US drove universities to improve efficiency, the centralised disbursal of the graduate tax would take away the incentive for universities to innovate.

But US-style university competition widens the gap between winners and losers. Often the focus is on the prestigious private institutions that have accumulated impressive research reputations and massive endowments. These private colleges have hefty price tags, but offer equally large financial aid packages. For example, the four years I spent at Williams College in Massachusetts would have cost more than 12 years of my parents’ income if the college hadn’t funded it fully. However, the distribution of resources is very unequal across private four-year colleges, public four-year colleges, and public two-year colleges.