Student loans are not new to PNG, it was implemented as the Tertiary Education Student Assistance Scheme (TESAS) between 2001 and 2007. About 7, 000 students borrowed money from the state, but only ONE woman repaid her loan! The government went to the extent of listing more than 3, 000 names in the newspapers and appealed to the public to assist in identifying those who got loans, and their guarantors but none responded. In total, the government spent K6. 6 million ($2.5 million). Last year, the government budget was K230 million ($49.3 million). About 10, 000 students are said to have borrowed varying amounts, but it is not clear how much of the K230 million has been borrowed.
The big question is: has the government learnt the lessons of 2001 – 2007? Moses Sakai has written two excellent articles on the history of student loans in PNG, and the recurring defects in this new Higher Education Loan Program (see article 1 here and article 2 here).
The recurring problems are as follows:
- In the TESAS era, there was no clear timeframe for loan repayment. Under HELP, there’s no clear timeframe on when the students repay their loans. It states that a graduate that starts working and earns K462 will have 10% of his/her salary automatically deducted (if less than K462 they don’t pay). This scenario assumes that the student has formal employment upon graduation. But how about those who are not employed? What happens if the graduate’s salary remains under the minimum threshold for years?
- If the graduate fails to repay the loans, the guarantors would repay the loan. Guarantors are either parents, siblings, wantoks etc., who agree to repay the loan if the student fails to repay in the future. There are countless uncertainties: what happens if the guarantors retires, resigns, is bankrupt, etc., and the graduate fails to repay? When guarantors were contacted after the cohorts of 2001 – 2007 failed to repay the TESAS loans, the guarantors refused to pay. What happens if that happens again?
- The graduate is required to notify DHERST and their employer that they have a student loan. Can self-accountability work?
There are other related issues that make the HELP contentious:
1. DHERST initially (2019/2020) stated that GPA is the primary requirement for those applying for loan. This is because graduates with high GPA have better employment opportunities, thus improves the chances of loan repayment. However, the government pushed an alternative narrative and succeeded: that students should not be discriminated against based on their GPA. Assuming DHERST was right, and weak students don’t get jobs after graduation, loan repayment will become an issue.
2. The logic that guarantors should repay the loan is interesting: The reason why students are going for HELP in the first place is because their wantoks cannot help them now. Requiring the same wantoks to repay if the graduates fail to repay is a silly logic.
3. There is a possibility that this may all be political and no loans will be repaid: Let’s look at government decisions on education since 2019. First Marape declared that he would eliminate free education from prep to secondary school level, and focus on providing assistance via HELP for higher education only. Outcry, especially on social media led to a change in position. Now it’s subsidized education. Second, he announced that HECAS & AES programs would be eliminated and replaced by HELP (students with high GPA quality for the AES whilst students below AES quality for HECAS – both are government scholarships). Due to public outcry, the government retained AES/HECAS alongside HELP in 2020. What happens if thousands refuse to repay the student loans? We might see more changing of goalposts.
4. The USA and Australia are some countries that PNG can learn from. Nobel Prize winning economist Joseph Stiligtz equates the student loans in the US to the housing bubble that led to the 2008 economic crisis. The access to finance and the promised benefits is enticing. But with a limited market for those graduating, it runs the risk of a bubble.
5. Predatory for-profit institutions. In both Australia and the US, many profit oriented institutions enter the higher education space because they want to make money off from student loans. These institutions provide low quality qualifications for profit, and students and the state struggle later: students struggle to find jobs with poor qualifications, and the state struggles to get back its money.
With about 20, 000 students excluded from the formal system in PNG every year, private institutions will pop-up everywhere to serve this segment. Students who cannot pay for their fees will go for the HELP funds, but will the pop-up private institutions provide credible qualifications?
Now that’s a critic of the government’s HELP program. For parents and students, HELP is something you should give some thought to.
STUDENT LOANS, CHAINED CAREERS!
Student loan is a burden, and if not careful, it will be like a rock chained to your leg, that you have to drag up the ladder in the most productive stage of your life. Below are scenarios you ought to know before you and your parents decide whether to get these loans, and how much to get.
The student completes a four years bachelor degree and gets a job. The repayment is tied to your income (income based repayment): your first pay will have at least two deductions – normal taxes paid by anyone with a job, as well as the automatic 10% deduction to repay your student loans if you earn K462 per fortnight. Below are how the US and Australian Governments structured student loan repayments:
A. A minimum income threshold is set so that graduates earning low incomes delay their repayments (below for PNG K462). However, because graduates with a university degree are most likely to start earning higher wages (than K462 for PNG) they will not be exempted from either taxes or repayments, from the very first pay.
B. Beyond the threshold, the graduate pays progressively higher rates. The higher your income, the higher the taxes and deductions for student loan repayments. This becomes a real impediment to the desire to work hard and climb up the ladder.
C. Future commercial loans for business etc.: One of the non-compromising conditions of the commercial banks is to ask whether the individual has outstanding loans. Any graduate with student loans will have to deal with this challenge (perhaps except for SME funds).
D. For the state: What if the graduates do not repay and debts start to accumulate? Student loans in the US alone is a staggering $1.7 trillion (K6 trillion plus in PNG currency).
Proposed solution for Government to consider
Instead of providing loans, improve the existing scholarships. The current scholarship has AES, which is for the very high achieving students, and HECAS for those below that. Introduce a third category to make it three:
- Full scholarship for students with very high GPA (the students within the current AES category should make up this category, but this time they pay nothing). It’s a reward system. The harder your work, the better the reward.
- AES – the AES category should be filled with students currently under HECAS.
- HECAS – the minimum GPA for HECAS should be reduced to accommodate more students.
This system should not be limited to the National Government. Provincial and District MPs who use portions of their DSIP & PSIP funds for school fees should also structure it this way. Reward is the key. It makes people work. You get to allocate resources to those that deserve it.
Message to Parents and Wantoks
If you can pay, pay for your child. You have done it before. Or at least let your child get half loan, you pay half. Crowdfunding that works in the Highlands is a great system. Someone from your tribe goes to university, takes pride, contribute and pay his/her school fees. If there’s money for bride price and contribution for the dead, there should be money for the living child.
If you cannot afford higher education fees, get the loan and study very hard. Get a good job and repay the loans.
Two related articles on higher education published by Academia Nomad that you may want to look up are:
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May 2021 be the great year for you.