Will Corinthian Colleges’s kind of education meltdown happen in Malaysia?

nnu2yb-corinthian
Photograph source: http://images.onset.freedom.com/ocregister/nnu2yb-corinthian.jpg

The final nails are being hammered into the coffin of Corinthian Colleges, once one of the largest for-profit education groups in the USA. The impact of this private higher education meltdown is far and wide. Many of its remaining 16,000 students are left out in the cold, most are shouldering huge personal / education debts with bleak future. Many of Corinthian’s problems that led to its downfall are related to inappropriate management of state-funded education loans to students and over promise of job prospects and pay levels. Can we find similarities in cases of education institutions’ collapse in Malaysia?

If PTPTN can finally get it’s act together (it looks as if it has began the clean-up which it should have been doing in terms of defaulting borrowers management long time ago), will we witness similar higher education meltdowns in Malaysia too?

There are just too many colleges (private, community, public etc.) chasing a Malaysian youth population that is not growing in tandem with their collective capacities. The growth in international students population can help to redress this only a little. Not all the smaller players have what it takes to attract foreign students!

Should PTPTN now also start honing on errand colleges and universities which have been over promising its students with job prospects? Let’s be fair on this, PTPTN should include every institution, both private and public where the most loan defaulters have come from. It also owes the citizens of Malaysia an explanation on why it had decided in November 2014 to whack 15% from the private college students’ PTPTN loan amount while taking only 5% from those in the public institutions of higher learning. This reduction has already showing its impact on the enrollment figures of many private institutions relying heavily on PTPTN loan to fund their students (does this ring a bell?….think Corinthian!).

Consolidation of the higher education industry of Malaysia was called for by some politicians recently. But these people may not have a full understanding on how the higher education industry works and they have no idea of the complexities that the act of consolidation (along the idea of banks mergers) would entail. Colleges and universities are not like banks, the “products” are all very different, the pricing systems and delivery schedules are all unique to individual institutions. It would be easier to let “sick” colleges die than to “cross infect” the healthier ones! No sane edupreneur will be willing to buy into someone else’s huge debt!

With more stringent entry requirements for private colleges and universities set to come into effect in 2016, and the possibilities of PTPTN getting tougher on institutions which produced the largest number of bad debtors, there is a huge storm that the higher education industry as a whole and the private sector in particular are riding into. The “Corinthian Meltdown” may yet to be witnessed in Malaysia!

I for one will not be buying any education stocks for now!

(Declaration: I do not hold any direct shares in any of the 4 public listed education groups in Bursa Malaysia!)

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