As expected, Budget 2026 offered almost nothing for private higher education institutions with the hopes of industry lobbyists for tax breaks, bailouts or liberalisation of foreign student recruitment falling on deaf ears.
On the other hand, public universities had welcome news. Free education is to be given to 5,800 students from low-income families with public universities receiving RM120 million or RM20,000 each.
An extension of exemptions from student loan repayments for public university graduates with first-class degrees from low-income families allocated RM90 million or RM15,000 each, pays off the money they already spent at the public universities.
Surprisingly, higher education minister Zambry Kadir announced the suspension of the loan exemption pending a review of the definition and standards of the first-class category to tighten eligibility.
One way of interpreting this is that the ministry considers first-class degrees from private universities to be worth less than those from public universities due to lower standards.
While overall spending on public universities was broadly the same, a special grant of RM500 million was given to five public universities to improve their credentials from foreign commercial ranking companies.
The irony is that this RM710 million could provide free education for 47,000 students, equivalent to almost 30% of all Malaysian bachelor degree students or almost 70% of private undergraduates, ending their reliance on student loans.
The apparent pro-public, anti-private position of the government may have economic justification.
First, private universities are commercial entities selling educational services and as such they live and die in the market. The government has no more reason to bail them out than for any private commercial enterprise.
Second, many of these institutions are foreign-owned or franchises with foreign branding.
The use of public subsidies for foreigners, as we see with RON95, is unpopular and may raise a legitimate issue of whether the government should subsidise foreign universities with cheap loans, tax breaks and credentials.
Third, as commercial enterprises, private universities have options.
They are much more lightly regulated than their public counterparts and can run joint ventures, sell foreign certificates, recruit foreign students, 40% of whom come from China, or simply sell-up, cash-out and move on.
In addition, the performance of private universities may not justify government support in terms of return on investment.
A recent attempt to show the economic impact of a foreign franchise campus claimed that it had generated RM30 billion in value-add, a number so large that it barely needs to be entertained.
The evidence across the sector as a whole has shown for a long time that private higher education institutions are financially unstable and many have already been sold or closed.
In terms of academic performance, private universities languish in local and international rankings despite investing millions of ringgit buying credentials from foreign commercial marketing agencies.
In the most important metric of student outcomes, graduates from private universities face unemployment, underemployment and low salaries barely justifying the investment they made, and are saddled with debts that they struggle to pay.
The message to private higher education institutions, that account for 45% of total enrolment and 41% of academic staff, is that they are on their own.
Government support is not only being denied but the reintroduction of travel bans for student loan defaulters, most of whom are from the private sector where loans are largest, will have a chilling effect on Malaysian student applications.
In response we are likely to see more foreign students in private universities who already take 60% of the total and fire-sales and takeovers of failing institutions by buyers from China picking-up Malaysian universities for a song.
The views expressed are those of the writer and do not necessarily reflect those of FMT.