In the red on student loans

An average Malaysian youth, with average academic results, from an average middle-income family will most likely need to get a study loan to pay for their college tuition fees.

And just as they are crossing the threshold between being a student and a working adult while flipping their tassels, many new graduates are preparing to undertake new hardships to manage student debt payments.

Instead of bursting with excitement for what the future beholds upon graduation, these youths are buckling under the weight of their study loan debt that chips away at their savings account before they even get the chance to start saving.

According to the National Higher Education Fund Corporation (PTPTN), a total of 412,245 people out of its 1.24 million borrowers had taken study loans but have yet to repay the money they had borrowed from the scheme. Study loans can be a huge burden, but not repaying the loan is not an option.

Here’s an action plan on how to manage your finances and repay your study loan (without incurring more financial burden):

1. Keep a good track record

Almost every study loan offers some kind of discount or at least does not charge additional penalty if you pay the loan on time every month.  If you have a PTPTN debt and you have been paying on time, you are entitled for a 10% discount from the Government. If you have a loan amount of RM45,000, the 10% discount can come up to a significant amount – an amount larger than many working adults’ first paycheques.

2. Don’t miss a payment

Ensure that your lender has all your latest contact details to avoid missing out on statements and letters. Most people missed out on payments, especially the first payment, because they do not receive timely statements and information from their lenders. Although starting work means incurring many new expenses, try to put aside the money for your student loan payment first, so you won’t overspend. Missing a payment will result in higher repayment that you may not be able to afford the following month.

3. Sign up for auto-debit

If you are the forgetful type, it will make sense to set up a standing instruction with your bank to the lender every month. You can’t spend what you don’t see. The money should be transferred to the lender before you get to dip your hand into your savings account. Find out when your salary will be in every month and schedule the loan payment accordingly.

4. Don’t forget tax deductions

Once you have started working, you will be required to file income tax if your salary is above RM2,500 a month. Be sure to file your education fee (up to RM5,000) to receive tax relief every year. This will help you save on taxes annually.

5. Don’t ignore your loans

Ignoring a debt will only make a bad situation worse. Borrowers who default will incur most cost on the loan due to the interest and other penalty that may be applicable. A loan that would normally take 10 years to repay can end up taking 15 years.

Want to find out more about PTPTN loan? Click here.

Haven’t been paying your PTPTN loan? Find out how it can affect you.