Policy Brief: Higher Education Financing System

Purpose - The objective of this policy brief is to provide policy recommendations to address problems of higher education financing system in Indonesia. Recent news reported that the total amount of interest-based online student loans given to students in various universities in Indonesia reached Rp 450 billion on February 26, 2024. The Chairman of the Business Competition Supervisory Commission (KPPU) stated that interest-bearing loan products are not in line with Act No. 12/2012 Article 76 of the Higher Education Law which prohibits the provision of interest-bearing loans. Methodology - The methodology used is descriptive approach which includes determining the objectives, conducting the research process including data collection, analyzing the benefits and costs, the basis for policy choices, and recommendations. Result - As a result, this policy brief proposes a recommendation, namely Student Tuition Fee Assistance with a Social Loan Scheme. Furthermore, in the implementation stage, several organizations must be involved, including the government and social lenders. Implication - This Policy Brief highlights the urgent need for policy and regulatory reforms to address the reliance on interest-based student loans, which are in contravention of Indonesia’s Higher Education Law. Rising tuition fees and inadequate repayment schemes limit access for economically disadvantaged students, underscoring the importance of equitable financing models, such as interest-free social loan schemes that leverage Zakat, Infaq, Sadaqah, and Waqf (ZISWAF) funds. By integrating financial technology and Islamic finance principles, these models can improve accessibility and efficiency while promoting social and economic justice. Furthermore, addressing these financing issues is critical to reducing graduate unemployment and supporting national economic growth, Keyword - Higher Education, Student Loan, Social Loan, ZISWAF