Without a doubt, education is one of the best investments you can make. With it, you can get a better paying career, access a multitude of income opportunities and make a meaningful contribution to society. But education is not free.
In Malaysia, a common way for us to be able to afford this cost of education is through PTPTN loans. While the PTPTN has opened the doors for many Malaysians to higher education and the opportunities that go with it, it’s common to hear that deferring PTPTN repayments has financial consequences that can dramatically affect your life goals. .
Ultimately, PTPTN is a loan – and all loans must be repaid. Let’s take a look at how the PTPTN compares to conventional loans, the repayment assistance available, and the consequences of deferred payment.
How does a PTPTN loan work?
Contrary to popular belief, the PTPTN is one of the most accessible student loans in Malaysia due to its exceptionally low interest rate. The loans have a flat interest rate of 1% (or Oujrah, Sharia-compliant service fee), which makes it relatively easy for you to pay small amounts after graduation.
Let’s say you borrow RM70,000 over a 15-year repayment period for an engineering course at a private university. The interest you will need to pay will be RM10,500 or RM58.33 per month (RM70,000 x 1% x 15 years). In contrast, your total monthly repayment would be RM447.22 per month (RM70,000 + RM10,500 / 15 years).
Based on this example, the interest rate of RM58.33 you have to pay monthly is extremely low compared to loans offered by banks.
However, the amount you can borrow is subject to your needs. You can get maximum funding if you are listed in Bantuan Prihatin Rakyat. But you will only get 75% funding if your family income is less than RM 8,000 and 50% funding if it is over RM 8,000.
What happens when you don’t pay off your PTPTN loan?
After graduation, you have a 12-month grace period, after which you will need to immediately start repaying your PTPTN loan. But what if you choose not to?
PTPTN will first issue up to 3 reminders followed by a formal notice for you to repay your loan. If you still don’t, you will be blacklisted by the Malaysian Immigration Department. This means that you are prohibited from traveling abroad, renewing or applying for a passport. If you don’t repay your loans again after being blacklisted, PTPTN could take the matter to court.
On top of that, you would be listed in the Central Credit Reference Information System (CCRIS) which in turn will have a bad impact on your credit history. You’ll end up with a bad credit score, which will make it difficult to approve a car or home loan, or credit card until you make immediate repayments. Imagine you are all ready to buy a new home to start a new family, but your loan is rejected due to bad credit!
What Kinds of Relief Can You Get?
Without a doubt, the government is aware of the difficult financial situation facing Malaysian employees, especially in light of the current pandemic economy. If you’re having trouble repaying your PTPTN loan, there are ways to make your repayments easier.
First, the government recently announced a three month delay until August 31 for PTPTN loans. If you have difficulty finding a job during this period, you can request this deferral on the PTPTN online portal.
Second, you can apply for a PTPTN loan repayment waiver if you are in the B40 or M40 group and graduated with high honors. Note, however, that you will need to make this request within the 12-month grace period. In addition, you will need to meet other requirements, such as having graduated full-time and graduating within a standard timeframe.
Third, you can always consult PTPTN if you are having difficulty with your refund. They might be able to reschedule or restructure your loan, provided you are able to repay it. That being said, it is perfectly fine to negotiate.
Should you consider prepaying your PTPTN loan?
As with any loan, the sooner you pay it off, the more interest you can save.
On the one hand, interest is only charged after the 12-month grace period. This means that if you pay off your entire loan within the 12-month grace period, you won’t have to pay any interest. And if you start making partial repayments within the 12-month grace period, you’ll only be charged interest on payments you make after that period.
Apart from that, consider how much interest you can save by paying off your loan several years ahead of schedule. Using the same example as above, you will need to pay interest of 10,500 RM to repay a PTPTN loan of 70,000 RM over a period of 15 years. Yet if you take 7 years to pay off the same loan, you will have to pay interest of RM 4,900 – that’s RM 5,100 in savings!
Therefore, if you can afford it, you should definitely consider paying off your PTPTN loan sooner. This way, you can have less hassle and more resources to focus on other financial commitments like buying your first home or starting a family.
Do your part
Did you know that PTPTN deliberately does not send out notices or letters of instruction on when to start repaying your loan? It’s your ticket to becoming an adult, which means being responsible for your own finances.
Consider being proactive in paying off your PTPTN loan. Otherwise, there would be negative consequences not only for you but for society as a whole. For every loan that goes unpaid, it affects the government’s ability to help students who need it most.
If you are having trouble repaying your loan, as mentioned, there are ways for you to make the process more feasible. And if you can pay off your loan sooner, you should.
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