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ECONOMICS 101: Someone please explain the concept of compounding interest to students and others
SOMETHING borrowed must be returned, or repaid. The undergraduates, presumably with enough sense, knowledge and intellect, who signed on the dotted line with higher education loan agency PTPTN must have been able to grasp this basic tenet of socio-economic engagement.
Now to go back and say it is unfair is rather disingenuous, and selfish, no matter how one tries to justify it. They could have objected to the terms before drawing down the money.
Incidentally, no government, from either side of the aisle, I hypothesise, would be keen to offer financial aid to those camping in downtown Kuala Lumpur, who we could surmise were likely missing classes and assignments, and who knows what their grades are. Why should any government reward irresponsibility?
Which is why I am rather bemused that some politicians are supporting this self-indulgence. Pakatan Rakyat leader Datuk Seri Anwar Ibrahim, for instance, in response, promised to abolish PTPTN, and presumably debts owed to it as well, and use income from Petronas to make higher education free.
Of course, the government can give free tertiary education to everyone who wishes to do so, but why should it? It would be costly and inefficient. Tertiary education, unlike primary and secondary schooling, is not a right. Similarly, scholarships and bursaries are privileges accorded to those who qualify.
Altruism, such as free higher education, is appealing in many ways. It offers a lifeline to those looking to fund higher education. It would also undeniably appeal to those not keen to honour their contractual obligations to PTPTN.
This tendency to promise free everything, from cradle to grave, is obviously fuelled by freaky economics, if not political desperation. There is no bother to look at cash flow issues, for instance, on the cost of national development or government operations. It is as if these promised proposals and policies are thought out in the backseat of a car while stumping for votes.
Is Petronas the bottomless pit to fund everything, from free education, free healthcare, toll-free private highways, cheap fuel at the pumps, etc? Can't politicians instead educate Malaysians on the responsibility of sharing the burden of nation building by paying taxes, rather than encouraging a culture of living off the system? I would implore that educating people on the need to widen the tax base through consumption taxes is more an indication of a responsible leadership than an opportunistic promise of a chicken in every pot.
There are, of course, many things one can argue with Anwar's proposition, but the most damning thing would be that it promotes irresponsibility and the false sense of entitlement. Free education, yes, if one does well and qualifies for aid.
But for the rest, the reward of higher education should come with a price. PTPTN offers those who do not qualify for scholarships, the opportunity to further their studies. PTPTN is also keeping many institutions of higher learning afloat.
PTPTN loans are offered at low, attractive interest rates when compared with similar education loans by commercial financial institutions. There is a need for interest charged on loans, together with the repayments, to make PTPTN self-sustainable. It is also very conscious of the need for fresh graduates to start in life by allowing flexible payments, some as low as RM100 per month.
Yet, someone must educate the concept of compounding interest to those who protest the higher amount that must be paid compared to the loan taken. Those undergraduates protesting must know how compounding interest works or else they would be very disappointed when they enter the real world and start buying cars and houses.
Despite having some level of intellectual disposition, or at least the ability to pass school examinations well, they are largely young and impressionable, easily taken in by the glib-tongued. These students are actually adults without adult responsibilities.
Their ability to repay loans due to unemployment is, of course, another issue altogether. A piece of certificate has never guaranteed anyone a job, especially in a competitive market with hundreds of thousands graduating every year. Regardless, one's obligations must be met and debts repaid. That is the adult thing to do.