TOP-QUALITY higher education is crucial for any high-income, developed nation, and in Malaysia, we are fortunate that it is at the heart of the government’s agenda to achieve this status. The Malaysia Education Blueprint (Higher Education), launched in April, sets out a bold vision to increase access to higher education and improve quality.
The MEB (HE) has been quickly followed by the University Transformation Programme (UNiTP) “Green Book” guidelines, which set out ideas for better governance of public universities, including more stable finances.
At the launch of the UNiTP Green Book at Universiti Putra Malaysia on Sept 7, Prime Minister Datuk Seri Najib Razak said: “We have a target of increasing access to higher education for 2.5 million students from 1.4 million currently, but to reach that, we need to have financial sources.”
He called on Higher Education Minister Datuk Seri Idris Jusoh to look for ideas to help the government create the best funding system for Malaysian higher education going forward.
This echoes the MEB (HE), which states that Malaysia needs to move from a government-funded system to one where all stakeholders contribute, proportionate to their means. To achieve this change, it is proposed that government funding should be linked to performance, and universities should create endowment and waqaf funds to help with self-financing. Both of these ideas make sense.
For students, however, funding plans in the MEB (HE) are still linked to a loan system based on an enhanced National Higher Education Fund Corporation (PTPTN) shifting to income-contingent loans. This is unfortunate because many students are already heavily in debt and with more entering the increasingly costly higher education sector, this is set to get worse.
Private universities in Malaysia, which depend heavily on loan financed students, are already struggling with tight finances. Around 46 per cent face financial stress, according to recent research, and with the proposed 15 per cent cut to PTPTN for private universities, as many as 70 per cent could go into the red. Private institutions will account for around half of higher education enrolments by 2025 and 53 per cent of university enrolments, according to the MEB (HE).
So, we need a new approach which will help students finance higher education without overburdening them with debt.
One example would be a “Post-18 Education Fund”, which would allow future students to save ahead of time and so, avoid graduating with a heavy burden of debt at the start of their working lives.
A simple example based on some reasonable assumptions helps us to understand how this could work. Imagine three parents make monthly savings of RM100, RM300 and RM500, respectively, for 10 years.
At an annual compound interest rate of 5.92 per cent, which is the average return on the Employees Provident Fund since 1952, the funds would be worth around RM16,000, RM48,500 and RM80,800, respectively, by 2025.
At current fees for a mid-range private university, RM16,000 is more than enough to cover a foundation programme (with some left over for living expenses), a fund of RM48,500 is enough to pay fees for an undergraduate programme, and RM80,800 would be enough to cover the same fees and living expenses.
Of course, by 2025, tuition fees and the cost of living would have risen. For a less expensive foundation programme with current fees of RM5,000 growing at five per cent per year — three per cent for inflation and two per cent for costs — this would be RM8,144, easily covered by RM100 per month.
For a foundation programme costing RM10,000, it would be RM16,300 by 2025, again covered by RM100 per month. For a mid-range bachelor’s degree costing RM45,000, this would be RM73,300 by 2025. You would need to save RM450 per month to cover that fully.
What about those who cannot afford the monthly savings?
Some 40 per cent of Malaysian households have an income of below RM2,500 per month, the so-called B40 group. The MEB (HE) makes clear that there will be more targeted support for socio-economically disadvantaged students to make enrolment more affordable and accessible to everyone who is eligible. This is to be welcomed.
By creating a “Post-18 Education Fund” for wealthier people, scarce resources can be released and targeted to those less able to save or pay for themselves.
Funding for higher education is a perennial problem for any country aiming for wider access and higher quality. The country benefits, so the government should contribute. Universities benefit, so they should chip in. Students benefit personally, so it seems fair that they should share some of the costs.
This is broadly agreed. It is also agreed that we don’t want costs to be a barrier to access nor do we want graduates burdened by debt when they start their working life. Saving in advance through a “Post-18 Education Fund” offers a way to help.
The writer was deputy vice-chancellor at Universiti Tun Abdul Razak and professor in the Graduate School of Business. He is a visiting fellow at the Penang Institute specialising in higher education management