Indonesia’s latest regulation allowing state universities with legal autonomy to take on debt has triggered a predictable backlash. Critics warn of creeping commercialisation, higher tuition fees, and the erosion of universities as public goods. Yet the real puzzle is not why the policy is controversial, but why the controversy arrived so late. The Permendiktisaintek No. 1/2026 regulation, which formalises borrowing procedures for Perguruan Tinggi Negeri Badan Hukum (PTN-BH), did not emerge from nowhere. A decade earlier, PP No. 26/2015 had already opened the door by allowing universities to draw funding from non-state sources, including loans. What the new regulation does is operationalise a trajectory that has been unfolding quietly: the transformation of Indonesian universities from state-funded institutions into hybrid organisations navigating market instruments.

The shift was gradual, technocratic, and, for many years, largely invisible. The 2015 framework spoke the language of flexibility, efficiency, and accountability. Loans were mentioned as one among several funding sources, not as a defining feature of university finance. Only with the 2026 regulation did borrowing become concrete, procedural, and measurable. Universities may now contract loans within defined limits, subject to transparency rules and risk assessments. The consequences of autonomy, long discussed in policy circles, have suddenly become legible to students and parents.

A Policy Born of Constraint, Not Ideology

It is tempting to interpret the policy as a straightforward case of neoliberal reform. That interpretation is too neat. A more plausible reading is that the regulation reflects fiscal constraint rather than ideological zeal. Indonesia’s public finances face competing demands: infrastructure, energy subsidies, social protection, and political priorities that rarely place research and higher education at the top. In such a context, expecting the state to fully fund research universities while also demanding global competitiveness is unrealistic.

Universities are asked to internationalise, digitise, and expand research capacity, yet public funding has not kept pace with these ambitions. Faced with this gap, PTN-BH institutions have pressed for clearer legal mechanisms to manage borrowing. The 2026 regulation can therefore be seen as a procedural safeguard, not merely a liberalisation. It imposes debt ceilings, requires feasibility studies, and prohibits the collateralisation of state assets. In effect, the ministry is acknowledging a reality: universities are already under financial pressure, and it is safer to regulate borrowing than to leave it in a grey zone.

This is not a uniquely Indonesian story. Around the world, universities have turned to debt to finance laboratories, dormitories, and digital infrastructure. What differs is the institutional ecosystem. In the United States, debt sits alongside large endowments, philanthropy, and mature capital markets. In Indonesia, such buffers are thin. Tuition fees and commercial activities remain the most reliable revenue streams. Debt, in this context, risks translating into higher costs for students.

Why the Outcry Came Late

Why, then, the sudden outcry? Part of the answer lies in timing. Over the past decade, tuition increases and widening inequality in access to higher education have made affordability a politically sensitive issue. A policy that might once have seemed technical now appears threatening. Borrowing by universities is interpreted not as infrastructure financing but as a precursor to fee hikes.

Another factor is visibility. Policy changes often provoke little reaction when they remain abstract. The 2015 framework altered funding logic but left everyday experience unchanged. The 2026 regulation, by contrast, introduces tangible mechanisms: loan agreements, repayment schedules, and financial disclosures. When policy becomes visible, so does anxiety.

There is also a deeper unease about the direction of higher education reform. The PTN-BH model borrows heavily from global research university templates, many of them US-centric. These models assume diversified revenue streams and robust private funding. Transplanted into a system without comparable philanthropic or endowment cultures, they rely disproportionately on tuition and debt. The result is not the American university model, but rather a hybrid that combines market pressures with limited social safety nets.

The government presents financial autonomy as empowerment. Critics see it as abdication. Both views contain elements of truth. On paper, subsidies remain. The state has not withdrawn from higher education funding. But when universities are encouraged to finance capital projects through borrowing, fiscal responsibility shifts subtly from the state to the institution. Over time, this may reshape the social contract of higher education: from a public entitlement to a shared financial burden.

Seek Flexibility?

Universities themselves are not passive victims of this shift. They seek flexibility to compete globally, attract partnerships, and build infrastructure. Yet autonomy carries risks. Institutions with strong reputations and wealthy student bases will find it easier to borrow and repay. Others may struggle, widening the resource disparities between elite and regional universities.

The most consequential effect of the new policy may not be commercialisation, but stratification. Debt capacity is tied to revenue. Universities that can charge higher fees or attract industry funding will expand faster. Those serving poorer regions — particularly institutions outside Java, where revenue generation capacity is structurally lower — may face tighter constraints, reinforcing educational inequality across spatial as well as social dimensions.

This dynamic is not inevitable, but it is plausible. Without targeted subsidies or redistributive policies, financial autonomy tends to amplify existing disparities. The rhetoric of efficiency can mask the emergence of a two-tier system.

The current controversy, though belated, is healthy. It forces a reckoning with questions long deferred: What is the purpose of public universities? How much financial risk should they bear? And what obligations does the state retain when autonomy expands? Framing the issue as a simple choice between state funding and market logic misses the point. Indonesia’s higher education system is already hybrid. The real challenge is governance: ensuring that borrowing supports long-term academic capacity without undermining access or public trust.

Governing the Gap: What Must Follow

If borrowing becomes routine, several policy responses are essential.

First, safeguards must ensure that debt servicing does not translate into tuition increases that exclude lower-income students. Financial autonomy without social protection risks eroding access — and with it, the foundational premise that public universities serve the public.

Second, transparency should extend beyond loan amounts to include projected impacts on fees and institutional priorities. Public accountability must accompany financial flexibility. Loan agreements and repayment structures should be subject to legislative oversight, not merely ministerial review.

Third, differentiated funding is needed to prevent the widening of resource disparities between institutions. Universities serving disadvantaged regions require stronger and sustained state support to avoid falling structurally behind their better-resourced counterparts. A uniform autonomy framework applied to non-uniform institutions will predictably produce unequal outcomes.

The surprise surrounding Indonesia’s university debt policy says less about the policy itself than about the slow, quiet transformation of higher education finance. What appears sudden is the culmination of a decade-long shift from state subsidy toward mixed funding models. Debt can finance laboratories and lecture halls — tangible additions to institutional capacity. Yet without redistributive safeguards and robust governance, it can equally become a mechanism through which fiscal pressure is transferred from the state to students, and from students to families least equipped to absorb it. The policy’s architecture will determine which outcome prevails.