PETALING JAYA: Malaysia’s education financing system is facing mounting pressure due to the growing number of National Higher Education Fund Corporation (PTPTN) loan defaulters.
Experts warn that continued failure by borrowers to repay their study loans could strain government resources, limit future funding availability and threaten the long-term sustainability of the country’s higher education support.
Universiti Teknologi Mara Academy of SME and Entrepreneurship Development coordinator Dr Mohamad Idham Md Razak said sustained default patterns may prompt tighter lending rules, which could restrict access to higher education for lower-income groups.
“Many borrowers struggle to repay their loans due to underemployment and low starting salaries, especially when they land in mismatched or oversaturated job markets.
“The problem worsens as stagnant wages force borrowers to prioritise basic living expenses over loan repayments, leading to more defaults and prolonged debt.”
Mohamad Idham said income-based repayment schemes or automatic deductions via the Employees Provident Fund could improve repayment rates by aligning payments with borrowers’ income, reducing default risk and promoting fairness.
“However, poorly structured deductions may burden low-income earners, so careful policy design is critical.”
National Association of Private Educational Institutions deputy president Dr Teh Choon Jin said weak enforcement and inconsistent follow-up have created a perception that education loan repayments are not urgent.
He said PTPTN repayment system is often seen as rigid and poorly communicated.
“Without strong enforcement, flexible repayment options or meaningful incentives, many borrowers end up delaying repayment indefinitely.
“Students don’t always treat the loans as real financial obligations while studying. After graduation, low or unstable incomes make it hard to prioritise repayment.”
Teh pointed out that the mismatch between academic qualifications and job market needs is undermining graduates’ ability to repay their loans.
He said many students graduate with degrees that don’t reflect current market demands, while employers increasingly seek real-world skills, adaptability
and experience over paper qualifications.
“To boost repayment rates, we must first bridge the employability gap through closer industry-academia collaboration and more relevant, future-ready training.”
Teh also said PTPTN repayment structure failed to account for borrowers’ varied financial realities.
“A one-size-fits-all approach that ignores fluctuating income levels often pushes borrowers to delay or avoid repayment altogether.
“Enforcement and incentives are also lacking. Delays rarely lead to consequences, and there are minimal rewards for early or consistent repayments.”
He warned that widespread non-repayment creates a ripple effect that extends beyond numbers, eroding trust in the system.
“Responsible borrowers may feel short-changed, and future students may worry that funds won’t be available for them. Worse, it signals that taking a loan without repaying is acceptable.
“Eventually, this could force the government to tighten loan access or cut back funding, hurting deserving students who rely on the loans to pursue higher education.
“A stronger repayment culture is essential to keep the system sustainable for future generations.”
Teh emphasised that the higher education fund and educational institutions must collaborate more closely to instil repayment responsibility early on.
He said tackling issues before graduation could help reduce defaults and promote accountability among borrowers.
“They should identify at-risk students – those with poor academic performance, financial struggles or limited job prospects – and provide targeted support such as financial counselling, flexible repayment plans and career guidance.”
It was reported that Higher Education Minister Datuk Seri Dr Zambry Abd Kadir had revealed that 400,000 PTPTN borrowers who graduated over a decade ago have yet to make a single repayment, with arrears now totalling RM5 billion.
