4 Things To Know About PTPTN's Scheduled Repayments Mechanism And How It Will Work

The repayment rate is supposedly lower than the old mechanism.

During the tabling of the 2019 Budget, it was announced that the National Higher Education Fund Corporation (PTPTN) will implement a new mechanism to ensure that the loans will be repaid

National Higher Education Fund (PTPTN) chairman Wan Saiful Wan Jan.

Image via New Straits Times

Initially, it was announced that borrowers who earn a minimum salary of RM1,000 would be subjected to the scheduled repayment mechanism. It has since been amended to apply only to those who earn RM2,000 and above.

In a briefing today, 5 December, PTPTN chairman Wan Saiful Wan Jan revealed more details about how the scheduled salary deductions (PGB) mechanism will be implemented, reported Free Malaysia Today.

1. PGB is said to benefit borrowers in the lower income bracket and youths who have just entered the workforce

"As an example, the repayment rate for someone who earns RM2,000 is just RM40. It is nearly half of the lowest repayment rate of the old mechanism, which was RM91.67," he said, reported Free Malaysia Today.

The full breakdown of the repayment mechanism is as follows:

- Under RM2,000 = no deductions

- RM2,000 to RM2,499.99 = 2% (RM40-RM49.99)

- RM2,500 to RM2,999.99 = 3% (RM75-RM89.99)

- RM3,000 to RM3,999.99 = 5% (RM150-RM199.99)

- RM4,000 to RM5,999.99 = 8% (RM320-RM479.99)

- RM6,000 to RM7,999.99 = 10% (RM600-RM799.99)

- RM8,000 and above = 15% (RM1,200 and above)

2. PTPTN will issue a directive to employers to deduct the amounts from their employees' salaries

Image via Times of Malta

"Employers will be responsible for deducting the salaries of their staff (borrowers) for the purpose of PTPTN loan repayment," he said, reported New Straits Times.

In this way, the mechanism emulates the Inland Revenue Board's (LHDN) monthly tax deduction (PCB) system.

"PTPTN will work with relevant agencies, among them LHDN, Employees' Provident Fund (EPF), Retirement Fund Inc (KWAP) and the Immigration Department to obtain salary information as well as details of borrowers' employers," added Wan Saiful.

3. Employers are not allowed to set conditions for helping their employees pay their loans

Employers who assist their employees in repaying PTPTN loans will already enjoy tax cut breaks for the amount paid. This is regardless if the loan was repaid in instalments or in one lump sum.

Therefore, setting conditions - such as a work bond - is not allowed.

4. A number of PTPTN borrowers will also be exempted from repaying their loans if they fulfil a set of requirements

These conditions apply to borrowers who:
- Are full-time bachelor's degree students,
- Complete their studies on time,
- Graduate with first-class honours in 2019, and
- Are categorised as a member of the B40 and M40 income group.

Image via MMU Malaysia

Additionally, PTPTN borrowers over the age of 60 will have their loans abolished provided they:
- Were earning between RM2,000 to RM4,000 a month, and
- Had been consistently repaying their loans over the past three years before turning 60 years old.

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