IMPLEMENTATION OF STUDENT LOAN ASSET-BACKED SECURITIZATION IN MALAYSIAN HIGHER EDUCATION.
(A STUDY CONDUCTED AT MALAYSIAN ECONOMY IN THE ASIA)
The research is to investigate the alternative financing in Malaysian Higher Education by introducing student loan securities as a type of asset-backed securitization. It will analyse and consider possible effects in order to relieve the pressure currently imposed on the Government Budget. The aim of this research is to identify the outstanding systems financed by capital market and banking systems in the United States and Chile and suggest how a similar system can be adopted to improve the National Higher Education Fund Corporation (PTPTN) as main corporation providing loans for student in Malaysia. The work considers the characteristics of the National Higher Education Fund Corporation (PTPTN), suggests a structure for student loans securitization, and study the potential of the Asset-backed Securitization process in resolving the student loans problem. The expectation is that the securitization process and the new financial instrument will benefit both the students and the government.
The contemporary understanding of asset-backed securities (ABS) defines the process as a creative way of raising funds. A definition along these lines is provided in Fan et al. (2004), emphasizing that the funds are raised through the issuance of marketable securities backed by future cash flows from revenue producing assets. A wide variety of assets has been securitised, including lease, auto loans, credit cards receivables, commercial mortgages, student loans, equipment leases, franchise fees, state lottery
winnings and litigation settlement payments. The focus of this research is the student loans asset-backed securities and how the system is being implemented worldwide (Fried and Breheny, 2005; Hartung et.al, 2006).
Student loans are clearly defined as financial aid given to a student by a federal or private lender that is specifically intended for education costs (Student Consolidation Loan, c2008). Other definitions of student loans are loans offered to students to assist in payment of the costs of professional education. These loans usually carry lower interest than other loans and are usually issued by the government. Often they are supplemented by student grants, which do not have to be repaid.
Even though Malaysia formed the National Higher Education Fund Corporation (PTPTN) in 1997 to provide loans to students for higher education, the scope of the PTPTN education loan service is limited due to limited financial resources for education loans. In Malaysia, PTPTN offers student loans representing the federal government to enable selected students pursue their studies in Malaysian universities and colleges (PTPTN, c2008).
Reflecting on the significance of the government to support student loans for higher education, PTPTN in 2007 had requested a soft loan of Ringgit Malaysia 2 billion from the government budget to provide loans for students in public and private higher education in Malaysia but the opposition parties rejected the idea. The reason for this disagreement was that the government budget had to focus more on social needs such
as healthcare, housing, education and public facilities for citizens. To solve the funding problem for the higher education system, PTPTN has no choice but to borrow money from the Employees Provident Fund (EPF) under the Ministry of Finance as an alternative resource for PTPTN.
The critical question raised here is how long PTPTN will need to borrow money in order to provide loans for students. Is the loan enough to support the increasing numbers of students every year? What are the alternative resources that can support PTPTN as the main education loans corporation in Malaysia? Based on these unsolved issues, the researcher is motivated to testify that ABS is set to...
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