By Diana Chai The storm brought about by the announcement by PTPTN wanting to link loan defaulters with the Central Credit Reference Information System (CCRIS) brought to the fore the plight of fresh graduates unable to repay their loans.
For now, after loud dissent from both government officials and the opposition; the idea has been abandoned. UMNO Youth leader Khairy Jamaluddin opined that education loans, unlike personal loans and car loans, were a necessity and graduates unable to repay should not be treated to the same blacklist as other loan defaulters. PKR de-facto leader Datuk Seri Anwar Ibrahim said the effort was deflecting from the government’s inability to provide free tertiary education to underprivileged students.
Whatever the political rhetoric, the problem remains that there are a large number of graduates who are simply not earning enough to repay their education loans and build a life.
A gloomy situation In late 2012, newspapers reported that fresh graduates were “not suitable for work and a liability”. Employers lament that despite tertiary education; many remained unfit to work and required many hours to train. This left them an unpopular choice, especially when many are asking salaries of RM2500-RM2800.
Although it cannot be denied that many graduates do not have the requisite skills; is a salary of RM2500 enough to get by in current economic conditions?
Some example calculations A fresh graduate earning RM2500 will likely have quite a few expenditures. Though in Asia, there is more acceptance of a culture of young adults living with their parents; this may save on rental but it’s unlikely, that with aging parents, the graduate is contributing nothing to the household.
Noriah, a fresh graduate, was one of the lucky few to score a job at RM2500. She lives with her parents. After considering EPF and SOCSO deductions, she brings home approximately RM2250. She gives her parents RM400 to help with utilities and groceries. A first car loan on a humble Viva or Proton Saga will cost RM350. Factor in repayments for an education loan of RM300; Noriah’s income has already whittled down to RM1200. Petrol and parking is likely to cost another RM200; cell phone line charges at RM80 and personal insurance at RM150, reducing the count further to RM770. Eating lunch during work days at a maximum of RM6 per day would cost approximately RM120.
Noriah is now left with a remainder of RM550 for savings, car repairs, her parents’ hospital visits if any, and any other emergency cost. All of the costs given above have been scaled down with no added ‘luxuries’ for a ‘lavish lifestyle’ such as café visits or shopping which youths are usually accused of. It’s not a sum impossible to live on but Noriah is unlikely to be able to afford her own house on that salary. As reported in July 2013, house prices in the Klang Valley cost on average RM700,000 with a monthly loan repayment amount of RM3800. Even low cost flats in the Klang Valley have breached the RM130,000 mark.
Yet, Noriah’s situation is still better than many other graduates who remain unemployed or employed at salaries well below RM2000.
Inflation, property boom, possible increases in taxes and fuel charges will likely tighten the financial noose not just for fresh graduates but average income earners throughout the country.
What went wrong? It is not surprising that many employers cry foul at paying RM2500 for a fresh graduate without the requisite skills when they are able to get more seasoned workers forRM500 more. But what has become of our education system that we are charging students tens of thousands of ringgit and yet not equipping them with the necessary abilities to find decent employment?
The problem here isn’t as simple as blacklisting a defaulter in hopes he will return borrowed money or claiming that everyone deserves free education (a nice thought but even more advanced nations aren’t able to just yet. In the US, education loans have hit USD1 trillion with 7 million borrowers in default). How about scrutinising our education system so we are able to produce graduates worthy of a good pay? Then let’s discourage property speculators to reduce home prices so the average rakyat can afford a house.
It’s certainly not easy and perhaps a tad idealistic: but shouldn’t the answer lie not in taking a thief to the stocks when he stole a loaf of bread but in why he was driven to steal in the first place? This article brought to you by Diana Chai of RinggitPlus.com. We believe all Malaysians should have access to free, accurate and independent personal finance information.