National Education Savings Account?

This is the first time I've heard of such a thing. PTPTN private higher education loan division manager Abdul Ghaffar Yusop discussed this new policy in the recently concluded Star Education Fair. The basic idea is that parents must put money into these savings account before their children can be eligible to take out loans from the PTPTN.

It was reported that:

Under a new ruling that comes into force this year, parents with a monthly household income of less than RM2,000 must have deposited at least RM500 in their account to qualify for a loan under the National Higher Education Fund Corporation (PTPTN).

Parents who earn more than RM2,000 monthly must have saved up at least RM3,000.

PTPTN private higher education loan division manager Abdul Ghaffar Yusop said that only orphans are exempted from this new ruling.

“Parents can deposit as little as RM20 a month. The main advantage of the SSPN is that the Government provides a matching grant of up to RM10,000 for parents who earn less than RM2,000 monthly,” he said.

Other benefits of the SSPN, which is administered by PTPTN, include yearly dividends that are tax-exempt.

This must be a response to the high rate of non-payment among students who have previously taken out loans from the PTPTN for purposes of pursuing a higher education degree. I've been consistently favorable that these students should be vigorously pursued to pay back their loans. But I think there are better ways to enforce this than to force parents to put money in an education savings accounts. The PTPTN can work with credit collection agencies or even with the International Revenue Service to collect on these loans. I'm less in favor of punishing parents (or forcing them to open up another forced savings account) for the sins of their children.

The other concern is that parents might not be aware of the need to open these savings accounts or that they might not be able to put enough money into these accounts by the time their children need to apply for the PTPTN loans.

But if this is one of the ways to send a clear signal that PTPTN loans are not 'free', then perhaps it is the lesser of possible bad solutions. It forces parents to save for their children's education so that they don't think that higher education is necessarily free, especially in public universities. And there are incentives such as tax free dividends and matching grants.

I haven't done enough research on this yet but does any of our readers know more about this savings account?