Student loan: a Malaysian story / Anita Abu Hassan and Mohd Syazrul Hafizi Husin

An education loan is a type of debt that is used to pay for learning, especially in the tertiary education level. The student or the parents can apply for the loan. Government agencies or private lenders, such as commercial banks provide education loans as well. The education loan provided by the commercial bank is required to be asset-backed. The borrower must provide collateral in a form of valuable asset worth more than the loan amount. The loan amount ranges from RM10,000 to RM150,000, an amount range obtained from the Maybank2u (2023) website to illustrate as an example. Due to the collateral requirement, only several students or parents can afford to apply it. On the other hand, scholarships may only be available to some because they are limited to a selected few. Funding is essential to continue one's education to the tertiary level. Students require funds to cover their educational expenditures, which include tuition, textbooks and other study materials, transportation, accommodation, and other day-to-day expenses that have risen in recent years. Students from low-income families need external assistance to manage the high costs of attending university to further their studies. Alternative financial sources, such as personal savings or family support, may be unavailable to some students. When a private education loan and a scholarship are unavailable, the only practical option for financing their education is a student loan from Perbadanan Tabung Pengajian Tinggi Nasional (PTPTN). However, taking on a debt will result in future financial commitments for the students' households. The Malaysian government established the Perbadanan Tabung Pengajian Tinggi Nasional (PTPTN) in 1997 to provide financial help to tertiary students. All students, whether attending public or private universities, are eligible for the PTPTN loan. The loan amount they receive will be determined by their courses, parents and family background, or household income. In Malaysia, tertiary education begins at the age of 18. As a result, the student may become a student loan borrower as early as 18. This is likely the first loan taken out by Malaysians as they begin their university studies. The borrower receives these student loans on a clean or unsecured basis. It is not an asset-backed loan. The repayment is purely reliant on the borrower's uncertain future income. As a result, the payback risk for PTPTN loans is extremely high. Non-payment of the loan would jeopardise the PTPTN's capacity to lend to more students in future. After graduation, most student loans have a grace period during which debtors are not required to make payments. Borrowers must repay the loan in instalments over a certain term after this period expires. As they enter the workforce, they remain saddled with tens of thousands of Ringgit in student loans, which have already neutralised their future salary, resulting in an impairment in income. They frequently confront the strain of managing their living expenditures, rent payments and other personal commitments in addition to repaying debts. As a result, some borrowers fail to repay their student loans. Wan Jan (2020) listed that among the reasons why the borrower fails the PTPTN loan payment are due to no regular income, regular but insufficient income, other commitments that are too large, weak enforcement by PTPTN, political protest and other factors. The PTPTN uses a variety of incentives to induce borrowers to pay, including discounts, no administration fees during deferred payments, payment by salary deduction or auto debit. The Central Credit Reference Information System (CCRIS) listing of PTPTN loans is one of the tactics PTPTN uses to boost collection. The CCRIS report summarises a borrower's financing and repayment history over the previous 12 months, as participating financial institutions and government agencies provided. It is just one of several sources banks and other financial institutions use to evaluate funding applications. Failure to repay the PTPTN loan will reflect negatively on the borrower's credit history.