PTPTN’s Announcement
On 21st September 2024, Malaysia's National Higher Education Fund Corporation (PTPTN) announced on their intention to file lawsuits against 430,000 debtors who have fallen behind on their loans, which total almost RM6 billion! Even though many of these borrowers have established careers, Higher Education Minister Datuk Seri Dr. Zambry Abd Kadir stressed that these borrowers have not made any repayments (being a moral responsibility). He has also stated that they are still open to negotiations with borrowers who wish to settle their debts before court action is taken.
Consequences for PTPTN Loan Defaulters
Travel Bans and Passport Restrictions The unpaid loans have significantly impacted PTPTN’s financial resources, as highlighted in business intelligence services in Malaysia, which are crucial for funding future students. Although interest rate is purposefully kept low to make education accessible to all, PTPTN borrowers who have graduated from Malaysian universities pose abusive problem which has become more prevalent. Vast majority of graduates tend to postpone repayments indefinitely, citing a variety of excuses including menial pay, indifferent administration, and onerous paperwork and procedures. PTPTN defaulters are subject to several harsh penalties, intended to promote repayment and guarantee the long-term viability of the loan scheme. Firstly, travel Bans are imposed on defaulting individuals as they may not be permitted to leave the nation. Unless their outstanding loans are paid off, they will not be able to renew their passports or pass through immigration checkpoints. Impact on Credit Scores and Financial Access Secondly, defaulters' credit scores are impacted when they are reported to the Central Credit Reference Information System (CCRIS). Hence, obtaining loans, credit cards, or other financial services from banks and other financial organizations are challenging. Legal Actions and Wage Garnishments Thirdly, PTPTN had always had the right to file a lawsuit against loan defaulters, which could lead to a ruling requiring the loan repayment in addition to extra legal costs. A lawsuit may also result in wage garnishment or other enforcement actions.
Options for Borrowers Facing Financial Difficulties
Loan Restructuring and Deferment Criteria Borrowers who experience financial difficulties, according to corporate due diligence services can apply for loan restructuring to adjust their repayment terms. However, they will need to provide evidence of their financial situation, such as income statements to support their application. PTPTN will review the application and determine the new repayment terms based on the borrower’s financial capacity. To be eligible for PTPTN loan deferment or restructuring, borrowers must meet specific criteria. Namely, borrowers with a monthly gross income of RM1,800 or below are eligible to apply for payment deferment. Another being borrowers who are not participating in the Debt Management Programme (DMP) under the Credit Counselling and Debt Management Agency (AKPK) for PTPTN loans. Automatic Salary Deduction System PTPTN too began implementing automatic salary deductions for loan repayments from September 2015 for civil servants. This initiative was extended to other borrowers from November 2015 to ensure consistent repayments and reduce the number of defaulters. This system is still being implemented and in November 2023, PTPTN has enhanced the process by introducing the Portal Majikan Online, which allows employers to manage salary deductions digitally. This online platform simplifies the process, making it more efficient and accessible for both employers and employees. Repayment Discounts and Incentives On March 1, 2023, PTPTN too had implemented various loan repayment discounts, which was available until May 31, 20231. This discount was part of the Budget 2023 announcement and included several categories. Namely, borrowers were offered 20% discount for full settlement of the loan, 15% discount for settling at least 50% of the total outstanding debt, with the remainder through salary deduction or scheduled direct debit repayment. Borrowers we also given 5% discount for repayments made through the myPTPTN application.
Importance of Repaying PTPTN Loans
Moral Responsibility and Social Accountability Repaying PTPTN loan is not just a financial obligation but a moral one that reflects one’s commitment to personal responsibility and societal well-being. It signifies moral responsibilities, reflecting both personal integrity and social accountability. When borrowers honour this responsibility, they are fulfilling this obligation that demonstrates personal integrity and reliability. Ensuring Fund Sustainability and Supporting Future Students It also ensures that PTPTN can continue to provide financial assistance to future students, which helps maintain the sustainability of the fund and supports the education of others. Consistent repayment too builds trust between borrowers and lenders. It shows that the borrower is responsible and can be trusted with financial commitments, which is crucial for one’s creditworthiness. Contribution to National Development By repaying loan, one can also contribute to the broader goal of national development. Educated individuals are essential for the growth and progress of the country, and loan repayments will help sustain this cycle. Even if moral commitment to personal responsibility and societal well-being is not of paramount concern, ensuring repayment obligations will avoid negative consequences such as travel bans, credit score impacts, and legal actions for the borrower. This will not only benefit the borrower personally, but also upholds the integrity of the financial system.
Role of Employers in Supporting PTPTN Repayments
Setting Up Automatic Salary Deductions Employers too can play a significant role in supporting PTPTN loan repayments, aided by HR background checks and contribute to the progress of the country. Employers can assist employees by setting up automatic salary deductions, foster a culture of responsibility and accountability by encouraging employees to honour their financial commitments and collaborate with PTPTN to streamline the process of loan repayments and provide additional support to employees. Promoting a Culture of Financial Responsibility By taking these steps, employers can help reduce the number of PTPTN loan defaulters, support their employees’ financial well-being, and contribute to the broader economic progress of Malaysia. Confidential Employee Loan Screening Employees on the other hand may choose not to reveal their PTPTN loan commitments to their employers for several reasons. Many employees prefer to keep their financial matters private and may feel uncomfortable sharing details about their debts with their employers, fear that disclosing their PTPTN commitments could lead to negative judgments about their financial stability or responsibility. They may also be concerned that revealing financial struggles could impact their job security or career progression and that employers will view them as less reliable or capable, whilst some might feel embarrassed about having student loan debt and hide to avoid any perceived stigma. Since most employees are not aware that their employers can assist with PTPTN repayments through automatic salary deductions, employers may play a role. Conducting student loan screening (with consent from employees) during pre-employment will ease the employees’ phobias and foster an environment where employees feel comfortable discussing their financial commitments without fear of judgment. Pre-screening on student loan will also ensure that any discussions about financial matters are kept confidential to protect employees’ privacy and that the employer provides a supportive environment that cultivate a workplace culture that values and supports employees’ well-being, including their financial health. A simple screening today means employers can help employees manage their PTPTN commitments more effectively, reduce financial stress, and contribute to a more productive and engaged workforce.
