Editorial: LPDP is spending trillions without knowing what it wants

The latest episode of LPDP controversies signals the need for a way-overdue reform

Pensioner of Trinity College, Cambridge (1815) by John Samuel Agar (Public Domain/Wikimedia Commons)

In what seems to be an annual occurrence at this point, the Indonesia Endowment Fund for Education (LPDP) is once again under public scrutiny after a former awardee bragged online about her child getting foreign citizenship. The video, which went viral on social media, sparked uproar, leading to what many have described as a “witch hunt” for LPDP awardees who failed to fulfill their obligation to return to Indonesia upon graduation.

We are not going to chime in on this particular case. Instead, we want to pose a fundamental question: What does LPDP actually want to achieve? If this remains unanswered, public outcry about LPDP will keep recurring. We understand the frustration with awardees: whether they return, whether they “contribute”, and whether they are worth the trillions of public funds spent year after year. But we think that the frustration is currently aimed at the wrong party.

In 2024, we already wrote about LPDP’s lack of a clear Theory of Change (ToC). Today, we want to reiterate this need. Hopefully, a change is coming so we won’t have to make a case for reform again next year and onwards.

Two distinct and legitimate goals

LPDP today is a general-purpose, return-mandatory scholarship with no required employment anchor and no deliberate diaspora strategy. Awardees are admitted on broad criteria, funded generously, and handed a legal obligation to return to a labor market that was not consulted on what it needs and is not prepared to absorb what it gets.

But we think there are ways to fix this. We propose 2 options for LPDP administrators to consider in defining their objectives and reforming their scholarship programs.

Option A: Nation-building

Under this model, LPDP would serve as a tool for nation-building. The state identifies a gap—e.g., in a hospital, a ministry, a university, a sector, and funds the right talent that could potentially fill that gap. As such, the scholarship will be tied to a role that already exists or is being planned for the recipient(s). Before departure, both parties know the plan and sign a concrete agreement: who the employer is, what the position is, and when the scholar returns to take it up.

This is roughly how Singapore’s Public Service Commission (PSC) scholarship model works. Bond scholars are placed into a specific ministry or statutory board upon return—for four to six years—depending on needs. The terms are clear, and the obligation to return comes with a specific guarantee. The returnee is designated to fill a specific role, within a specific institution, for a specific duration—structured enough that both parties understand the deal before the scholarship is awarded.

Under this logic, LPDP should accept only applicants with a confirmed institutional sponsor: a government agency, a hospital, a university, or a private sector institution with clear value-add to the nation. No sponsor, no scholarship. This way, the LPDP will not merely tell its awardees to “just return home” and “figure it out” themselves, which continues to put its awardees between the impossible choices of returning with no prospect and taking opportunities while violating their obligation to return.

Option B: Global standing

Under this model, the LPDP would wager a long-term bet on national prestige. The goal will be to produce a generation of internationally educated Indonesians with credentials from the world’s best institutions, build elite networks, and accumulate the kind of expertise and credibility that can eventually open doors for the country to increase its presence on the global stage.

With this goal in mind, the mandatory return clause naturally becomes irrelevant. If there is no job waiting for them at home or at least a sector or system within which they can try to build things from the ground up, LPDP is basically wasting its own investments.

In its current logic, LPDP is basically sending a message to its awardees that it’s better for them to come back home with, say, a degree in theoretical physics and start another nasi goreng franchise rather than work in another country with leading theoretical physics research institutions, systems, financing, and facilities. All simply because LPDP administrators can’t—and won’t—define what they mean by “contribution,” whereas Indonesia is simply not ready to absorb the different kinds of talents and expertise that come from a sudden influx of graduates with international degrees.

The better bet—one that countries like China and India have implicitly made—is to let them stay abroad and trust that the value of having a well-educated diaspora compounds over time. India did not engineer its way to having its nationals lead Google, Microsoft, and the IMF by demanding they return home after graduation. It happened because a generation of talented Indians was educated at the world’s top institutions, remained connected to their roots, and carried their country’s identity with them as they rose.

A scholarship designed for this purpose would look more like a soft loan or a long-term grant—flexible enough to let recipients build genuine global standing, with structured mechanisms to keep them tied to Indonesia over time, rather than a legal obligation that forces a lazy choice between excelling abroad and getting stuck at home. Surely, it doesn’t have to be an either-or situation, but as things stand now, LPDP is setting itself up to fail.

Is the current design both or neither?

The consequence of LPDP’s lack of clarity is predictable. Awardees who return find that what they studied does not map onto what jobs are available. Meanwhile, those who stay abroad risk a penalty which many are increasingly treating as a buyout option.

As of early 2026, over 600 awardees are under investigation for suspected contract violations. In the meantime, LPDP continues to send a growing cohort of awardees across the world. Many of these awardees take LPDP scholarships because the opportunity is too good to miss, but they do not have a clear vision of what their degrees would unlock. Instead of a career accelerator, LPDP has become an option for many seeking a career break.

By no means are we suggesting the abovementioned proposals are the only two possible options for how to restructure the scholarship. The point is that the current scheme is far from ideal, and that reform is overdue.

And we are not alone in thinking this. In 2024, then-Finance Minister Sri Mulyani met with McKinsey to discuss LPDP governance reform. That same year, a review by the Supreme Audit Board (BPK) found several problems, among others: (1) discrepancy between the number of scholarships granted and the number of recipients finishing their degrees, (2) inconsistent application of admission standards during selection, and (3) full disbursement of funds to recipients who do not finish their degrees. Most recently, Higher Education Vice Minister Stella Christie said they were conducting a cost-benefit analysis to inspect the “fairness and quality” of LPDP scholarships.

These are all reasonable steps. But still, they risk producing refined answers to the wrong questions in the first place. Thus, we hope to ignite wider conversations on how LPDP could be reformed so it could deliver a better impact. It’s about time we put this tired debate to rest—and that has to start with the government setting a strong theory of change for LPDP and actually enforcing it.