Defaulting Your PTPTN Loan

Impacting your dream plans in more ways than one

PTPTN 101

PTPTN is a government education loan with a flat interest rate of 1% p.a. Most university students vied to obtain the loan to benefit from exceptionally low repayment amounts. Those unsuccessful, settled with other education loans offered by banks with significantly higher interest rates.

Of late, many media sources have reported the rising number of university leavers’ defaulting their PTPTN loans. They body’s move to reduce the number of loan approvals, as reported in the news, had caused a public uproar. Although interest rate is kept low to ensure borrowers are not burdened, the large majority tend to defer repayments with unreasonable excuses such as poor management by administrators, selective blacklisting, low salary (despite PTPTN proving a structured repayment scheme accordance to salary) and tedious payment methods.  

Defaulting on your loan is a serious matter and it has significantly affected the operation of a noble scheme set out by the government. Last year alone 611,056 students did not stick to their scheduled repayment; with over RM5 billion outstanding dues.

ALERT

It seems PTPTN has switched its main objective of dispersing loans to chasing after debtors.

Perhaps it is the lack of awareness about the implications of not paying loans that are deterring borrowers from repaying. The body is exercising strong measures by liaising with other cooperation’s to recuperate their losses and teach a lesson or two about financial responsibility to borrowers. This includes:

• Automatic salary deduction of civil servants who have not or have been inconsistent in making payment;
• Restrictions (possible barring) from leaving the country;
• Getting blacklisted in the Central Credit Reference Information System (CCRIS), which is a Bank Negara-database system. This reflects your credit scores shared among all financial institutions; and
• Legal action.

According to property investor Sandeep Grewal:  “Considering CCRIS (Central Credit Reference Information System) has added PTPTN on its list to reflect credit scores, banks will now be aware of your overdue statuses. If there are overdue payments, banks will not approve your loans. But if your instalments are paid on time and no overdue is reflected then it is not a problem. PTPTN is similar to other loans so it is important for you to keep up with the payments schedule, and have the same concern that you have when you default any type of loan or credit facility. You will not be able to obtain other loans such as car loans, property loans or credit cards until the overdue is resolved.”

DON’T POINT FINGER

The blame cannot be solely pointed at borrowers who are not servicing their loans. Earlier accounts point to inefficiency of the management. Some borrowers were blindsided by the action taken by authorities without prior notice. They also claim selective persecution. Since the inception in 1997, authorities did not aggressively take measures to combat defaulters; the rising number of higher education opportunities in public or private universities, colleges and polytechnic has increased the demand for PTPTN loans without proper regulations until billions of outstanding dues have gone unpaid.

These measures have been more prevalent since Bank Negara laid out stricter measures to banks. Legal practitioner Chris Tan says the risk of not paying up PTPTN can be seen as an eyesore to your loan applications and affect your chances of obtaining your dream home because you don’t qualify for loans. Being blacklisted is not the end of it all. Once you are on track with payment, the record will be expunged.

MOVING FOWARD

PTPTN should place a better yardstick in streamlining loan applicantions and enforce better regulations and management in dealing defaulters. PTPTN loan is certainly not a gift for students but rather a scheme devised to assist those in need to finance their education for a better future. Borrowers should have the moral obligation to service their loans accordingly. They indeed need to pay so they don’t deprive the current and future generation off such facility. One would shudder to think if such schemes no longer exist. Furthermore, do consider how being blacklisted and barred from obtaining loans impact your capacity to build a better future for yourself and family.