Making the grade: Providing students with the resources to excel

Financing education in Malaysia, be it through bursaries, grants or student loans, is a booming business. A variety of players – the federal government and a wide range of public and private institutions, universities, funds, charities, banks and large businesses – share this market, the expansion of which mirrors that of tertiary education. Tuition fees are comparatively affordable, but are offset by relatively high living costs.

According to a Buffalo University study, being a student in Malaysia can cost anywhere from RM9000 ($2900) to over RM35,000 ($11,300) a year, living expenses included. Whether the higher education institution is public or private is key to the equation: yearly costs (including tuition and other fees) vary from RM2000 ($645) in the public sector and RM15,000 ($4840) in private institutions. Some courses, such as medicine, attract fees over RM500,000m ($161,000), and tuition at Singaporean, European or American universities can reach many times that amount. PTPTN – TOO BIG TO FAIL?: The government-established National Higher Education Fund Corporation (PTPTN) was created in 1997 under the Ministry of Higher Education to provide subsidised loans for students to attend private and public tertiary institutions. There are currently 900,000 students enrolled in public and private universities in Malaysia; 210,000 of them received a grant or loan from the fund.

As of February 2012, the PTPTN has awarded RM43bn ($13.9m) worth of student loans. However, the amount actually disbursed was RM29.4bn ($9.5bn). In 2011, the PTPTN gave out RM3.81bn ($1.2bn) worth of loans for study at home. At the same time, 11,764 students that graduated with first-class degrees were made exempt from their PTPTN loan repayments, which amounted to RM339.07m ($109.4m). However, critics point out that wealthy families can apply for (partial) loans – an unintended windfall effect. There are also concerns regarding the scheme’s sustainability: payment compliance has been low (numbers vary from 10% to 25%). Collaboration with the Inland Revenue and an increase in prosecutions have, according to the PTPTN, caused repayment rates to surge to over 80% in 2012.

The Treasury cut its budget transfers to the PTPTN in recent years. To address this, the PTPTN issued sukuks (Islamic bonds) to keep itself afloat. It recently sold RM2.5bn ($806.5m) worth of government-backed Islamic securities, with a 10-year yield at 3.85%. If it stays in its current form, the PTPTN is likely to require additional bond issues. Other means of financing the PTPTN, such as diverting RM2bn ($645.2m) a year from the profits of Petronas, the state-owned oil and gas company, has been ruled out by the government.

GOVERNMENT INCREASES GRANTS: Recent government interventions included retroactively converting 4430 PTPTN loans since 2005 into scholarships, as the students concerned had received first-class degrees, costing RM116.2m ($37.5bn). This is taken to be indicative of the government’s policy to focus more on grants. Together with 40 years of affirmative action, PTPTN loans helped increase enrolment among bumiputera( indigenous Malaysians) in universities. Currently, the rate is over 60%, as nearly all loan recipients are bumiputera. Another government scheme, the Majlis Amanah Rakyat (MARA) Study Loan, is reserved for bumiputera students only. States also have loan and scholarship schemes aimed at local pupils.

In 2011 4000 students were granted government scholarships, amounting to RM1.44bn ($464m). In 2012 total government expenditures climbed to some RM2.12bn ($684m). New schemes are being launched to add a dose of meritocracy in education financing. Since 2012 all 1609 students who obtained between 9 A+ and 12 A+ in the 2011 Malaysian Certificate of Education (taken by year-five secondary school pupils), are automatically eligible for a bursary to enrol in pre-university courses, prior to the students’ first degree, which can take place locally or abroad. It had been the case in previous years that some A+ students had not received these grants. The government is also has plans for other bright students who have offers from foreign universities and plan to study in any field relevant to the 12 National Key Economic Areas, such as health, engineering, ICT or agronomy. Overall, deputy higher education minister, Saifuddin Abdullah, told local media that the government was providing around 90% of all education financing in Malaysia.

Student loans and scholarships are one of the ways the government has implemented its affirmative action policies in the past. According to a 2009 report on education funding in Asia, grants and loans from the PTPTN have favoured bumiputera students almost exclusively since its creation. This looks unlikely to change.

PRIVATE FUNDING: Private-sector players in the Malaysian student loan market tend to be large banking institutions, among which the bumiputera Commercial, RHB Bank, Standard Chartered and UOB Bank play the largest part. Loans vary according to students’ needs and resources, but a typical loan involves a repayment plan of RM15,000 ($4840) a year over five to 10 years, interest being 2-3% above the bank’s base rate.

ADDITIONAL SUPPORT: Some not-for-profit institutions offer combined awards. The Kuok Foundation disburses some “half-loan, half-grant” awards, the loan being interest-free. There are a number of private scholarships available from banks (Maybank, HSBC and ING), corporations (Petronas, ExxonMobil, Dell) and private universities. For example, the RM3.7m ($1.2bn) Higher Education Scholarship Fund, is funded by the Malaysian Association of Private Colleges and Universities. Fulbright and the Commonwealth Scholarship and Fellowship Plan (CSFP), are also present.

The CSFP, for instance, disburses 10 scholarships in Malaysia through the Public Service Department, a government agency that channels private and public funding to students. This type of public-private partnership exemplifies Malaysia’s proactive approach to finding and funding education. The government’s wealth fund, Khazanah Nasional, for example, is also heavily invested in private businesses across Malaysia. It distributes the Khazanah Cambridge Scholarship and Khazanah Global Scholarship programmes, which sponsor students accepted into degree programmes at the top American and British universities.

ATTRACTING DONORS: The private or semi-private entities outlined above represent at most approximately 15% of education financing in Malaysia. In its 2012 budget, the government proposed that companies providing scholarships directly to students be given double tax deductions (instead of single ones previously), which is designed to attract more private donors.

Nonetheless, the financing from the private sector remains small compared to the level of public funding. Recent political wrangling over PTPTN and its treasury troubles may provide an opportunity for private investment to claim a larger share of the market, but federal and state funding is unlikely to diminish. There will likely be few opportunities in private educational loans in the short term, as many students in public schools manage without them, opting instead for paid work or making use of family support. As the sector grows and expenses rise, loans may become a desirable option.