Without a doubt, education is one of the very best investments that you can make. With it, you can secure a higher-paying career, as well as contribute significantly to society. But education does not come without a cost.
In Malaysia, a common way for us to be able to afford this cost of education is through PTPTN loans. PTPTN stands for Perbadanan Tabung Pendidikan Tinggi Nasional (National Higher Education Fund Corporation). It is a government agency that provides study loans to Malaysian students for their tertiary education.
The name “PTPTN” might have a negative connotation to you, based on the horror stories that you might have heard about people not paying back their loans. But don’t worry, the stories are only true if you treat it like a scholarship, rather than a loan. At the end of the day, loans need to be repaid.
How does a PTPTN loan work?
Contrary to popular belief, PTPTN is one of Malaysia’s most accessible study loans due to its exceptionally low-interest rate. The loans have a flat-rate interest of 1% (or ujrah, a Shariah-compliant service fee), which makes it relatively easy for you to pay off in small amounts after you graduate.
Let’s say you’re borrowing RM70,000 over a repayment period of 15 years for an engineering course at a private university. The interest that you would need to pay will work out to RM10,500 or RM58.33 per month (RM70,000 x 1% x 15 years). Your total monthly repayment, on the other hand, would be RM447.22 per month (RM70,000 + RM10,500 / 15 years).
Based on this example, the interest rate of RM58.33 that you need to pay monthly is extremely low compared to that of loans offered by banks.
However, the amount that you can borrow is subject to your needs. You can get maximum financing if you are listed in Bantuan Prihatin Rakyat. But you would only get 75% financing if your family income is below RM8,000, and 50% financing if it exceeds RM8,000.
What happens when you don’t pay off your PTPTN loan?
After your graduation, you have a 12-month grace period, after which you would need to immediately start repaying your PTPTN loan. But what happens if you choose not to?
PTPTN will first issue up to 3 reminders followed by a demand letter for you to repay your loan. All unpaid loans will automatically be listed under the Central Credit Reference Information System (CCRIS) 12 months after the borrower graduates. You should make regular repayments towards your PTPTN loan to keep your credit report on CCRIS healthy.
If you are facing difficulty in managing the debt and repaying the loan, you can also reach out to PTPTN to restructure your loan repayment schedule.
If you do not continue repaying your loan, this will show up in your CCRIS report, which in turn, will reflect poorly on your credit history. You will end up with a poor credit score, which will make it difficult for you to get approved for a car or home loan, or a credit card until you make immediate repayments. Imagine that you are all ready to buy a new home to start a new family, only to have your loan rejected on a bad credit score!
What types of relief can you get?
Doubtless, the government is not ignorant of the financial predicament Malaysian employees face, especially in light of the current pandemic economy. If you have trouble repaying your PTPTN loan, there are ways in which you can ease your repayments.
Firstly, the government has recently announced a three-month deferment until 31st August for PTPTN loans. If you’re struggling to find employment during this time, you can apply for this deferment on PTPTN’s online portal.
Secondly, you can apply for an exemption from repaying your PTPTN loan if you are from the B40 or M40 group and graduated with First Class Honours. Do note however that you would need to make this application within the 12-month grace period. Also, you would need to meet other requirements, such as having pursued your degree full-time and having completed it within a standard time frame.
Thirdly, you can always consult PTPTN if you experience any difficulties in your repayment. They might be able to reschedule or restructure your loan, as long as you would be able to pay it off. That being said, it is perfectly fine to negotiate.
Should you consider paying off your PTPTN loan early?
As with any loan, the earlier you pay it off, the more you can save on interest.
For one thing, interest is charged only after the 12-month grace period. This means that if you repay your entire loan within the 12-month grace period, you would not have to pay any interest at all. And if you start making partial repayments within the 12-month grace period, you would be charged with interest only for the payments you make after that time period.
Aside from that, consider how much interest you can save by repaying your loan several years earlier than the scheduled period. Using the same example as above, you would need to pay an interest of RM10,500 for repaying a PTPTN loan of RM70,000 over a period of 15 years. Yet, if you take 7 years to repay the same loan, you would be charged with an interest of RM4,900 – that’s RM5,100 in savings!
| Financing amount | No. of repayment years | Total interest payment |
|---|---|---|
| RM70,000 | 15 | RM10,500 |
| RM70,000 | 7 | RM4,900 |
Therefore, if you can afford it, you should definitely consider paying off your PTPTN loan early. This way, you can have less to worry about and have more resources to focus on other financial commitments like such as buying your first home or starting a family.
Do your part
Did you know that PTPTN deliberately does not send any notices or instruction letters on when you must start repaying your loan? This is your ticket to adulting, which means being responsible for your own finances.
Consider being proactive in repaying your PTPTN loan. Otherwise, there would be negative consequences not only for you but for society at large. For every loan that is not repaid, it affects the government’s ability to assist the students who need those loans the most.
If you do face trouble in repaying your loan, as mentioned, there are ways for you to make the process more doable. And if you can repay your loan earlier, you should do so.
All the best!
