Even with discounts, hard for borrowers to pay off study loans

Yasmin Ramlan

Borrowers at the National Higher Education Fund office in Putrajaya. Those who pay off their study loans in full or partially before December 2018 are eligible for discounts. – The Malaysian Insight file pic, December 17, 2017.

LOW wages and the high cost of living have made it hard for borrowers of the government’s higher education loan scheme (PTPTN) to pay back their debts even as they are offered discounts to do so in Budget 2018.

Some borrowers of PTPTN, or the National Higher Education Fund, automatically fall into the Bottom 40% (B40) of households after they graduate – meaning they earn less than RM3,860 a month.

These are people like Mohamad Shah Suradi, a technician who currently earns RM3,200 a month and who hasn’t started paying off his PTPTN debt of RM15,000.

The 28-year-old has been blacklisted by the Immigration Department and is unable to leave the country.

When he first started work, his salary was only RM2,500 per month and he could not afford to make monthly deductions to PTPTN.

“I have many commitments and my salary is low. I only have enough to keep afloat. Living in the city, everything is so expensive there’s just not enough to pay PTPTN,” said Shah who is originally from Perak.

He now earns RM3,200 a month but says he is unable to start paying as his expenses increased after he got married and had a child.

Each month, he sends RM600 to his mother and RM500 is to service a car loan. He also helps his wife pay for the monthly instalments on their housing loan.

When The Malaysian Insight told him of the government’s recent offer that he could qualify for a 10% discount on his total loan provided he made monthly deductions, Shah said:

“I won’t take it. My pay is just enough to keep my family afloat. After all, what is 10% going to get me?”

The offer

In budget 2018, the government offered PTPTN borrowers  discounts of 20% or 10% provided they fulfilled certain conditions.

Borrowers who make a one-off payment to settle their remaining debt are entitled to a 20% discount on that amount.

Those who make a one-off payment to settle half of their debt are entitled to a 10% discount on that amount.

Borrowers who elect to make monthly, scheduled deductions from their salaries will also qualify for a 10% discount.

The offer is only valid until December 2018.

The discounts are to entice more borrowers to pay up. Currently only 46.6% of borrowers pay their PTPTN loans.

Between 2011 and 2015 PTPTN recorded a total loss of RM6.5 billion. In 2015, unpaid PTPTN loans totalled RM8.49 billion.

Currently, PTPTN lists defaulters in the Central Credit Reference Information System (CCRIS) so that they are unable to take housing or vehicle loans.

The fund has also encouraged borrowers to take funds out of their Employees Provident Fund (EPF) “Account Two” to pay back their loans.

Defaulters are also blacklisted by the Immigration Department from leaving the country.

This is something that occurred to Nabilah Fuad, when she received a notice from Immigration that she was barred from leaving the country.

“I had to take out some of my EPF money to pay for a portion of what I owed,” said the online content writer.

She has been behind on her monthly payments which are set at RM400 for each of the loans she took for her diploma and bachelors degree totalling RM78,000.

“I pay per month but only what I can afford to. Sometimes RM50, sometimes RM150. It depends on what I can afford for that month. 

“Sometimes I can’t make the payment because I had to use the money for other things.”

“I can’t pay according to their schedule (RM400) as it would affect my expenses for food. I have to pay rent and transport costs to work.”

Nabilah does not own a car but she forks out RM600 a month for travel expenses from her apartment in Kota Damansara to her office in Petaling Jaya.

“Sometimes I hitch a ride with my friend. So I can save a bit. If not, I have to pay for a Grabcar as there are times where I have to attend my company’s events”.

Nabilah also does not think much of the government’s offer for discounts on her PTPTN loan.

“If it is 10% discount on my monthly payments then I think its worth it. But if it is a 10% discount on the overall amount then I don’t think it is worth it.

Risk and necessity

Using EPF money to pay for PTPTN is risky said Professor Norma Mansor of Universiti Malaya.

This is because Malaysians in general already do not have enough savings for their retirement, said the director of the Social Security Research Centre (SSRC).

B40 income earners still do not have enough in retirement savings despite contributing to EPF throughout their working years, she said recently.

SSRC’s studies show that the majority of EPF’s second account withdrawals were used for buying houses, renovating homes, and funding children’s education.

Selangor executive councillor for education Nik Nazmi Nik Ahmad said PTPTN should set a minimum RM4,000 monthly income before it started collecting from borrowers.

“The high cost of living makes it hard for borrowers to have any money left over at the end of the month to pay PTPTN,” said Nik Nazmi.

“The majority of borrowers are not paid much. They have to pay for rent, some have to send money home to their folks. Some have to pay for loans of their vehicles because these have become necessities.”

Fadzlee Ayob knows the experience. When he applied for jobs, almost all his employers asked him whether he had his own vehicle.

In order not to be handicapped in his job prospects he went out and bought a MyVi 1.3x.

“People often asked me why didn’t I just buy a second hand car? I wanted to, but there isn’t a 0% down payment for second-hand cars. My parents also didn’t have enough money to help me pay the deposit.

“Approvals for loan applications for new cars are also fast.”

Fadzlee now spends RM500 a month to pay his car loan and RM600 for petrol and toll charges on his daily Shah Alam-Setiawngsa commute.

When he first started work he could not afford to pay the monthly PTPTN deductions as he only earned RM2,000 a month.

A year later, he could only afford to pay RM250 per month for his RM72,000 education loan. This is below the RM400 scheduled payment.

He only started paying the RM400 a month after his finances stabilised. – December 17, 2017.

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