Indonesia Thinks Its University Students are Ready for Mountains of Debt

I finally saw one of the most phenomenal films of 2017 when it hit Indonesian theaters last week: Greta Gerwig’s Lady Bird. The movie made me feel a lot of things, but it also got me thinking about something pretty boring… student loans.

When the main character, Christine "Lady Bird" McPherson tells her mother that she just has to go to a fancy East Coast university, she is told to apply to a more affordable, more local school. "Good education," it seems, is just too damn expensive.

This scene in Lady Bird is a reminder that student loans can trap middle class Americans in a seemingly bottomless hole of debt. And here in Indonesia, it's a lesson we still haven't learned yet.

The Indonesian government trashed its student loans program decades ago amid evidence of widespread misuse and fraud. Now the country's current President Joko Widodo wants to bring the program back. “I’m going to give you all some homework on student loans,” Jokowi told banking officials at a recent meeting at Merdeka Palace.

So how do people feel about student loans coming back? The response has been… mixed. While student loans could theoretically open the door to higher education for more Indonesians, the possibility of graduating with a bunch of debt into a shitty job market isn't exactly the future a lot of us hoped for.

Proponents of the plan say student loans are common in a lot of developed nations, places like the United States, South Korea, and Sweden. But in places like the US, these same college grads struggle to pay off their loans after graduation. Considering how bad some professions pay, is it even worth it to get a loan in the first place? That not even mentioning the study that claim to show how the federal student loan system itself is one of the reasons why universities are more expensive in the US than anywhere else in the world.

How much does a college education cost in Indonesia? Four years of a public university can cost between Rp 50 million ($3,635 USD) and Rp 100 million ($7,270 USD), on average. At a private university, these costs balloon to as much as Rp 200 million ($14,540 USD), and in both instances students and their families have to pay out of pocket, one semester at a time.

Paul Sutaryono, a banking expert, told VICE that the proposed student loan plan was meant to offset some of this burden.

“The government wants to help students to finish their education as early as possible, so universities can be more efficient," he told VICE. "This will especially help students in their last year of university, because this will motivate them to graduate [on time].”

But Paul also acknowledged that the plan has its downsides. For example, there's always a risk of people not paying their loans, leave banks weighed down with what's called a non-performing loan (NPL). Why does he worry about whether people will repay their loans? Because that's exactly what happened back during the New Order regime.

“What happened during my era is that most students didn’t pay off their loans," M. Nasir, the minister of research, technology and higher education, told local media. "And then their diploma was withheld. But they didn’t need their actual diploma to work, they only needed the legal copy."

Nasir received his own student loan back in 1985 for between Rp 500,000 and Rp 1 million. That's worth Rp 8.5 and Rp 17 million in today's rupiah. Even with all that debt after graduation, he was able to repay his loans within two years of working, but Nasir admitted that his story wasn't the standard. Plenty of others just didn't repay their loans.

Critics of the plan accused the government of allowing banks to see students as walking cash cows instead of future university graduates. One expert interviewed by VICE told me that a new student loan system would likely target lower and middle income students, a segment of the population that should be offered scholarships by the government instead.

"I personally believe that education, from primary school to university, should be free," Jimmy Paat, an education observer from Jakarta State University, told VICE. "It’s a lot to cover, I know, but don’t they say that education isn't cheap?”

How likely is it that fresh graduates won't be able to pay off their loans? Jimmy did the math for us. Say you attend a public university and graduate to find a job as a non-tenured teacher earning about Rp 400,000 to Rp 800,000 a month. There's no way that person is going to be able to pay off their student loans in four years.

“The question is, who’s this student loan for?” Jimmy told VICE. "Is it possible that the government expects students not to be able to pay it off?”

It's a similar situation in the US, where 40 percent of graduates with student loans don't ever pay them off. A research by the Brookings Institutions found that most of the people who graduated in 2010 and have at least $50,000 USD in student loans are still struggling to pay off their debts four years later. The combined anxiety of living under a mountain of debt has created a system where student loans were described as a "source of existential dread" for many college grads.

“I’m concerned that this will only give false hope to poor people,” Jimmy told VICE. “We’re fed this idea that we have to pursue our education because it will eventually lead to a life of convenience, a well-paying job, and social mobility. To me that’s just an illusion. That’s not always what happens."