An employee serves a customer at the National Higher Education Fund Corporation (PTPTN) in Kuala Lumpur July 16, 2018. — Picture by Firdaus Latif

KUALA LUMPUR, Aug 4 — The National Higher Education Fund Corporation (PTPTN) has proposed deductions from its debtors’ combined monthly Employees Provident Fund (EPF) contribution from employer and employee as the “best possible solution” for its repayment scheme, FMT reported today.

Citing an unnamed source, the news outlet reported that the yet-to-be-approved proposal would only erase part of the university student loan debts as it would affect those who earn a monthly salary above RM2,000 while those earning less would not need to repay their loans.

“It is simply not financially viable to fully execute [a total write-off]; doing so will cost the government tens of billions over the next five years,” the unnamed official was quoted as saying.

Pakatan Harapan had pledged to erase all debts owed to the corporation in its GE14 manifesto.

The source said the proposed method was to tap into the debtors’ EPF contributions and has a two-tier system of repayments depending on monthly salary.

For those earning between RM2,000 and RM4,000, a proposed deduction of between two per cent and four per cent would be made from the combined monthly EPF contribution, which is a total of 23 per cent of salary.

As for those earning above RM4,000 a month, the source told FMT that it would be a maximum of 8 per cent deduction instead of 15 per cent as approved by the Cabinet last December.

The proposed repayment method also provides the choice of repaying the loans through a combination of EPF deductions and cash.

“We feel this solution is the best way forward because it will not affect the borrower’s cash flow and the PTPTN can still recoup funds to fund future borrowers,” the source was quoted as saying, adding that defaulters do not need to worry of being placed on travel blacklist, as the previous Barisan Nasional government had done.

However, the source said there would be stricter enforcement of loan repayments, including possible legal action.

Last December, PTPTN had proposed to deduct the funds directly from the salaries of loan takers earning above RM2,000 a month.

The scheme proposed to directly deduct the wages of borrowers earning above RM2,000 monthly at rates of between 2 and 15 per cent depending on their income levels.