PNG’s tertiary loan programmes

Focus
In this article, MOSES SAKAI discusses the lessons learnt from the experience of the tertiary students loan scheme.

THE Government of Papua New Guinea (PNG) through the National Executive Council (NEC) decision NG179/2019 last Dec 17, formally established the higher education loan programme, also known as Help.
The tertiary students loan scheme came with an initial funding of K200 million (US$49.3 million).
The decision, in fact, was one of the priorities of the Marape Government as detailed in the Marape manifesto launched on the eve of PNG’s 44th Independence Day last Sept 16.
In his manifesto,Prime Minister James Marape clearly stated that his Government would provide a lifetime interest-free loan to tertiary students commencing this year.
He also made it clear that the government intentionally introduced the policy not just to invest in human capital development but to remove financial burden from the parents.
In his address to students and parents at the Pacific Adventist University’s 35th graduation ceremony last Dec 1, Marape said: “No more will you pay tertiary education school fees.
“As long as you have an NID (national identification card) and a residency as a Papua New Guinean, you will get money for your school fees.”
The policy itself is not new in PNG.
A similar scheme was introduced two decades ago but did not work well.
This blog post looks at the lessons we can learn from that earlier experience.

First-year students at the University of Papua New Guinea waiting to enter the main lecture theatre for orientation at the Waigani campus earlier this month. – Nationalfilepic

In 1999, Sir Mekere Morauta’s government abolished the national scholarship scheme (Natschol) and introduced the tertiary education students assistance scheme (Tesas) as a loan programme administered by the then Office of Higher Education (OHE) (now the Department of Higher Education, Research, Science and Technology or DHERST).
The loan programme was introduced to help rural and urban families, who cannot afford to pay for their children’s tertiary education and to improve the extent and the quality of higher education in the country.
It was announced by then minister for education Muki Taranupi on Feb 18, 1999, when addressing the Divine Word University’s 17th graduation ceremony in Madang.
The Tesas loan programme came into effect in 2000.
Students who performed well academically but couldn’t afford their studies were told to obtain loans between K100 and K2,000 as per the terms of the loan programme.
From 2000 to 2007, a total of K6.6 million (US$2.5 million) was given out by OHE as loans to more than 7,000 students.
However, the loan programme was suspended from 2007 to 2009 due to lack of repayments by students, who had already graduated and were working in public and private organisations.
In an attempt to recoup the outstanding loans from the beneficiaries, the OHE started contacting them to find out where they were working.
The OHE listed the names of 3,947 recipients in newspaper advertisements, while appealing to the public for information about their whereabouts.
However, from the 7,000-plus students who obtained the loans and 3,947 beneficiaries listed in the newspaper, only one beneficiary, a woman, repaid her loan in 2004.
In 2009, after five years of implementation, the director-general of OHE, Dr William Tagis, said that the problem was a lack of coordination with and action from the Internal Revenue Commission.
There may be two reasons why the Tesas loan programme failed.
First, students protested the abolition of the Natschol and perhaps, as in other countries, the Government wanted to silence students by not enforcing repayment.
A review of the introduction of student loan systems around the world by Maureen Woodhall points to the problems often caused by their politically controversial nature.
Second, in PNG, income tax payment is an employer responsibility.
Individuals do not fill in annual tax returns.
There is little or no incentive for employers to check up on the loan-repayment status of their employees.
Marape’s new loan programme risks suffering the same fate.
Tesas is now a grant.
An earlier press statement released by DHERST stated that Tesas awards would cease and Help would be the only available source of funding beginning in the 2020 second semester.
DHERST secretary professor Fr Jan Czuba, said that this was a direct instruction from Marape and Higher Education Minister Nick Kuman.
However, a subsequent press release from DHERST has said that the two facilities will coexist.
According to this statement, Help is a non-compulsory facility set up to assist those unfortunate students who couldn’t afford their studies.
Those students who perform well academically will continue to receive Government payments under Tesas.
The confusion to date does not augur well for PNG’s second attempt to introduce a tertiary student loan scheme.
Already students are referring to Help as a “financial disaster”.
For this second attempt to work better than the first, clarity, preparation and coordination among government implementing agencies will be key.

This article appeared first on Devpolicy Blog, devpolicy.org, from the Development Policy Centre at The Australian National University.

  • Moses Sakai is a tutor at the University of Papua New Guinea’s school of business and public policy.