In Malaysia, paying back your student loan can win you an iPhone X

22 Dec 2017

ONE unit of Apple’s iPhone X and 19 units of Huawei’s P10 smartphones are up for grabs as prizes in a lucky draw held by Malaysia’s National Higher Education Fund Corporation (PTPTN) to get more defaulters to repay their study loans.

The semi-autonomous agency said each repayment of RM1,000 (USD245.22) or more will entitle borrowers to one entry in the lucky draw held in conjunction with its 20th anniversary, according to The Malay Mail.

Mungkinkah hasrat anda untuk memiliki iPhone X menjadi kenyataan. Boleh bergaya dengan smartphone canggih ini di tahun baru nanti. Bayar lebih, lagi banyak peluang untuk menang. Hubungi Careline PTPTN atau layari https://t.co/ucnwOJ0RMg untuk membuat bayaran balik sekarang.. pic.twitter.com/FEuY93utM0

— PTPTN (@twitptptn) December 20, 2017

PTPTN was set up in 1997, as an agency under the Higher Education Ministry tasked to provide loans to students from lower-income backgrounds to finance their higher education in local universities. Until two years ago, the agency has distributed 2,464,937 loans amounting approximately RM55.83 billion.

But it has been plagued by high loan delinquency rates – Less than half (46.6 percent) of borrowers pay their loans and a total amount of RM8.49 billion (USD2.081 billion) remained unpaid in 2015.

Efforts have been made to fix this. A discount scheme was announced in the latest budget unveiled in October, offering discounts of 20 percent or 10 percent if defaulters made a one-off payment to settle their remaining debt in total or in half, respectively. In 2008, borrowers were given the option to switch to a lower interest rate through ujrah, a flat-rate service charge of one percent annually based on Shariah principles, from the previous fixed interest rate of three percent per annum.

But with low wages and rising cost of living, many fresh graduates now belong in the Bottom 40 income bracket – earning less than RM3,860 (USD946.54) per month – and thus do not have enough disposable income to pay off their study loans, discounts or not, The Malaysian Insight reported.

Other factors contributing to the high delinquency include the lackadaisical attitude in servicing their debt as well as rising youth unemployment and underemployment.

Endorsing the vanity of this generation

Mas Shaari, who took out a loan years ago to finance her studies at the National University of Malaysia, does not think the lucky draw this time around is a good idea.

It has come to this 😑 https://t.co/WwuvqVvicI

— Celine Hor (@finixcel) December 21, 2017

Dangling smartphones as reward for repaying their loans only “feeds into the vanity of this generation”, something PTPTN should not be endorsing, according to the Science graduate, now working in the media industry.

“Most people who use Apple products – why do they do it? Is it because Apple products have good specifications? Hardly ever,” Mas said.

“It’s because Apple products are some kind of a social status, especially the iPhone X which is super luxurious. Most people, especially young people, don’t even know what iPhones are capable of but they’d do anything to have it – because either they want to fit in with their friends or want their social status to rise.”

PTPTN did not name the iPhone X model it will award, but the premium smartphone is reportedly the most expensive in the market now, with the cheapest model retailing at RM5,149 (USD1261.56). The price for a P10 is RM2,499 (USD612.28). In contrast, the median starting salary for fresh graduates is RM2,770 per month.

Mas believes there are other ways to encourage graduates to repay their loans, like offering stock bonds or gold bar investments, as examples of items that will bring better returns to them in the future, compared to a luxury smartphone.

Jazlan Zakirin, who graduated from the Mara Technology University a few years back, is more optimistic about the lucky draw. The advertising graduate believes it can spur graduates to repay their loans and hopefully, make it easier for future students to have access to the funds. But still, he’s not interested in the lucky draw.

“I need the money for something more important and I’m not really interested in getting new phones,” he said.

This article first appeared on our sister website Asian Correspondent