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Education Loan Repayment and Performances: The Malaysian Graduates

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DOI: 10.18535/afmj/v2i6.05

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 Everant.org/AFMJ Research Article

Account and Financial Management Journal ISSN: 2456-3374

Impact Factor: 4.614

Education Loan Repayment and Performances: The Malaysian

Graduates Perspectives
Edward Wong Sek Khin1, Ahmad Nasharuddin2, Kamisah Ismail3, Lee Su Teng4, Mohammad Nazri5
Faculty of Business and Accountancy, University of Malaya, Malaysia.

ARTICLE INFO ABSTRACT

This study examined the factors that encouraged and influenced the intention
to make repayment of education loan, National Higher Education Fund
Corporation (PTPTN) in Malaysia. The study adapted the Theory of
Reasoned Action (TRA) based on the study of Fishbein and Ajzen (1980)
this development was mainly to predict attitudinal influence and behavioral
intention. In order to investigate people’s thinking process that leads to the
decision of repayment, the study would be a descriptive study based on 300
participants who graduated from one of the public university in Malaysia.
The correlation analysis resulted from this study confirmed previous
researchers’ observations that linked higher educational loan repayment
commitments with a higher ability to predict attitudinal influence and
behavioral intention. The results suggested that among the three factors that
were, attitude towards education loan repayment; perception of affordability
of loan repayment that affect the quality of life after graduation and
perception towards loan agreements were the most important predictors of
repayment of education loan management. The findings from this study
could assist the National Higher Education Fund Corporation (PTPTN) to
corresponding Author: understand further their borrower insights in paying back loans owed. The
Edward Wong Sek Khin knowledge can also assist policymakers to understand better specific
Faculty of Business and strategies approaches and other relevant matters in making sure that
Accountancy, University of borrowers comply with the repayment conditions while not being a burden
Malaya, Malaysia. to both government and the public.
KEYWORDS: - Education loan repayment, Theory of reasoned action, attitudinal influence, and
behavioral intention.

Introduction themselves to pursue higher or tertiary education

There seems to be a never-ending debate level. As mentioned by Zainal and Ismail (2012),
over the National Higher Education Fund the Malaysian higher education sector has been
Corporation (PTPTN) student loans whether it is a growing tremendously for the past 10 years or so.
burden or a blessing towards students in Malaysia. The ever-increasing number of enrolment in both
As more and more new higher education public and private institutions indicates that the
establishments are emerging in Malaysia in the trend is growing year by year. This result is
form of public and private institutions, there are primarily due to the large number of student loans
more opportunities created for students to enroll
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 Edward Wong Sek Khin1, Account and Financial Management Journal ISSN: 2456-3374 2017
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provided by the National Higher Education Fund minimize and address loan defaulters. By
Corporation (PTPTN) (Zainal and Ismail, 2012). achieving the understanding of graduates towards
The increase in number of students and the repayment of the loans, it can help PTPTN to
higher learning institutions has resulted in a replenish their funds for future generation.
shortage of scholarships that are available to the PTPTN has coordinated many efforts to achieve
students by the relevant agencies. This has this goal. Among the initiatives taken includes
created a gap solved only by the government engaging with the public / students, as well as
providing education loans to the students. This giving discounts to graduates with consistent
financial aid has become a necessity for students repayment. This also includes the recently
who wish to continue their studies (Abu Bakar et proposed of blacklisting loan defaulters under the
al., 2006). Despite the government efforts to Bank Negara's Central Credit Reference
help students in achieving tertiary education, Information System (CCRIS) (Ghazali, 2013).
many students tend to take it for granted. As the This would require new measures and
numbers of borrowers grow, the repayment from commitments from all relevant parties to
graduates is very much lower than expected. transform and ensure that the National Higher
PTPTN has a number of 11,956 borrowers in 1997 Education Fund Corporation is sustainable for
and the amount of borrowers has been future generations. Therefore, this study will
increasingly year-by-year. The number of identify the factors that influence the repayment
borrowers since that time has become RM 1.69 intention of education loans among graduates in
million (cumulative) as of 31 December 2010, and Malaysia.
the total amount of PTPTN loans is a cumulative This study seeks to answer the following research
RM 37.4 billion. questions:
This has come to no surprise, as PTPTN has been  What are the factors influencing intention of
the driver for students to seek higher level of loan re-payment among graduates?
education in Malaysia. Despite the fact, it is  Do the graduates’ attitudes and perceptions
actually public financial educational assistance, towards PTPTN loans and the repayment of
this does not mean that students who borrowed PTPTN loans affect the intention to pay?
from the PTPTN will expect a full subsidy from
the government. This would mean that no one has Literature Review
to repay the loan. If this were the case, there is no
Tertiary Education
need for the establishment of PTPTN and a free
The importance of higher or tertiary education
education system would prevail. Borrowers need
institution to the development of the nation and its
to remember that the fund needs replenishment or
well-being is essential to become a high impact
else it will create burdens and consequences in the
nation. Thus, the affordability of tertiary
future.
education to people from all backgrounds is
According to Ismail, Serguieva, and Singh
important to achieve this vision. Many
(2011), Malaysia is one of the countries that have
governments all over the world have faced such
a high loan default rate. Although recent trends
an issue. The level of education debt differs a lot
are showing an increase in repayments, it is still
depending on the type of institution a particular
not enough to sustain the funds required for the
student is attending. According to Zainal and
future. The inadequacy of repayments may result
Ismail (2011), those students who attend private
in stricter rules and regulation by the four
colleges and universities borrowed the most
policymakers and it might cause major changes to
amount of loan with an average of RM 53,750 and
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 Edward Wong Sek Khin1, Account and Financial Management Journal ISSN: 2456-3374 2017
Impact Factor: 4.614
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RM 31,324 respectively. These figures are most when he or she has a debt load that is above 8 %.
likely to increase year by year as mentioned by The study also found that students that have a high
Benjamin et al. (2011), a study showed in the educational debt have lower salaries in average
USA tuition fees and other fees have been compared to other students. Therefore, the
increasing much faster than the cost of other amount of default can be a good gauge when
goods over the last decade or so. The predicting the amount of repayment.
combination of rising costs of higher education
and the higher costs of living will make education The Link between Attitudes towards Education
loans a necessity. Such prospects are worrying Loan Repayment.
and most likely the prediction is that this will TRA contains two essential variables, Attitude
continue in the future. and Perception of loan repayment as a burden
towards loan repayment intention. A student’s
Theory of Reasoned Action (TRA) attitude is the individual's positive or negative
TRA is a model for the prediction of behavioral feelings (evaluative affect) about loan repayment.
intention, spanning predictions of attitude and The users’ desirability and salient beliefs will
predictions of behavior. The subsequent construct their feelings towards the loan and
separation of behavioral intention from behavior predicts a user’s intention (Ismail et al., 2011). As
allows for explanation of limiting factors on observed, attitudes have the incentives to repay
attitudinal influence (Ajzen, 1980). Fishbein in loan. These observations suggest the following
1975 and Ajzen developed this model in 1980 that hypothesis
led to the study of attitudes and behaviors. This Hypothesis 1: Attitude towards education loan
research applied the TRA model in order to repayment has a positive relationship with
investigate the process that leads to the decision of intention to repay PTPTN loan.
whether or not to repay a certain loan. The TRA
states that the direct forerunner of the decision is
The link between awareness of PTPTN by the
loan repayment intention. This will later
media towards education loan repayment
translates to actual behavior of repayment of loan Ismail et al. (2011) explained that the students are
depending on the degree of the student’s managing their awareness on the loan issues can
evaluation that perceives it as negative or positive. ensure the efficient use of the money borrowed
during their studying years as well as after
Attitude of Students toward PTPTN Loan graduating. Issues created by the media have a
Repayment and Intention to Pay positive relationship with loan repayment.
According to Ismail et al. (2011), the problems in Therefore, the following hypothesis is developed:
regards to attitude towards loans is seldom
touched and understood. This is mainly due to Hypothesis 2: Awareness of PTPTN issues
research on attitude were more focused in the field created by the media has a positively relationship
of psychology, and not on finance or debt with intention to repay PTPTN loan.
management. Graduates that have debts are
facing difficulties in making repayment of their The link between perceived affordability of
education loans. What becomes a serious issue is repayment after graduating towards education
that they are servicing other debts as well (Zainal loan repayment.
& Ismail, 2012). As mentioned in a previous The third hypothesis accommodates the
study by Price (2004), a student is a loan defaulter incorporation of perceived quality and
affordability of living after graduating. It refers to
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 Edward Wong Sek Khin1, Account and Financial Management Journal ISSN: 2456-3374 2017
Impact Factor: 4.614
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the effects of any diminishing in the quality of ‘Perception of Loan Agreement’. The ‘Intention to
living to cope with the affordability of repaying repay PTPTN Loan’ has been identified as the
the loan. In other words, borrowers are more dependent variable. The SPSS was used to
likely to prioritize which of the factors in their analyze the data gathered from the respondents
lives that is more important, i.e., spending or and the standard multiple regression was applied
repayment; this includes mortgages, car loans, and to study the relationships between each other.
other costs incurring life-style decisions.
Hypothesis 3: Perceived affordability of
repayment after graduating has a positively
relationship with intention to repay PTPTN loan.

The link between perceptions towards loan

agreement towards education loan repayment.
The personal perception about loan agreements
whether the borrowers understand the agreement
well or not could affect loan repayment after
graduation, legal consequences for defaulters and
their future livelihood. In this regard, the
following hypothesis is developed: Figure 1: Proposed Research Framework
Hypothesis 4: Perception towards loan agreement
Methodology
has a positively relationship with intention to
repay PTPTN loan. Sampling design and data collection
procedure: This research employed a descriptive
Research Frameworks design to support the study of hypotheses
This study examines the influencing presented. The survey instrument used involved a
factors of education loan repayment in Malaysia. combination of specific questionnaires for each of
Based on the literature review, it was proposed the area of attitude, awareness, perception of
that the study will use a simplified Theory of affordability, perception of loan agreement and
Reasoned Action (TRA) in order to illustrate the includes demographic variables.
fundamental processes that lead to loan repayment These self-administered questionnaires were
decisions as what has been introduced by Ismail et distributed to a convenience sample of 300
al. (2011). Furthermore, the TRA model states graduates from one of the leading pubic university
that the loan repayment intention is the immediate in Malaysia, using non-probability sampling
precursor of the decision of repayment (Ismail et methods.
al., 2011). The model (Figure 3.1) summarized the
relationship between four independent variables Data analysis techniques: The data was analyzed
and one dependant variable that is the using the Statistical Package for Social Sciences
fundamental framework of the study. The (SPSS) version 16.0 program. A code was
independent variables consist of ‘Attitude towards established for each variable prior to input into the
Education Loan Repayment’(Attitude), ‘Awareness
program.
of PTPTN Issues by the Media’ (Awareness), All Likert Scale points for all questions
‘Perceived Affordability of Repayment after under a particular measure were summed to
Graduating’ (Perception of affordability) and produce a new variable.
791 Volume 2 Issue 6 June 2017
DOI: 10.18535/afmj/v2i6.05
Page : 788-797
 Edward Wong Sek Khin1, Account and Financial Management Journal ISSN: 2456-3374 2017
Impact Factor: 4.614
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The following derived measures from the Table 1: Participant profile

summing of the Likert Scale points of the Characteristics Frequency Percent
respective questions were: Gender
 attitude Male 103 41.2%
 awareness Female 148 58.8%
Age
 perception of affordability 20-29 87 34.8%
 perception of loan agreement 30-39 141 56.4%
46-49 12 4.8%
Above 50 10 4.0%
The data analysis consisted of the following parts:
Marital status
 Test of normality for each variable using Single 113 45.2%
the Descriptive Numerical Method of Married 137 54.8%
Skewness and Kurtosis statistics. Ethnic
Malay 186 74.8%
 For a test of scale reliability, used was Chinese 41 16.4%
Cronbach’s coefficient alpha . Indian 23 9.2%
 Determination of the relationship between Qualification
each dimension of the variables with the Doctorate degree 0 0.0%
Master’s degree 68 27.2%
education loan repayment program, used Bachelor’s degree 182 72.8%
was the Pearson correlation coefficient Diploma/certificate 0 0.0%
analysis. Occupation
Full time student 41 16.4%
 Determination of the linear composite
Private sector 194 77.6%
relationship between the above four Government sector 15 6.0%
variables concerning participation in the Own Business 0 0.0%
education loan repayment program, used Unemployed 0 0.0%
Monthly Income
was Multivariate statistical technique for all RM3000 and below 17 6.8%
variables regression. RM3000-RM6000 121 48.4%
RM6001-RM9000 91 36.4%
RESULTS RM9001-RM11000 21 8.4%
RM11000 above 0 0.0%
Profile of respondents: The majority of the Place of Study
respondents are female (58.8%) while the Public University 189 75.6%
Private Uni/College 61 24.4%
remaining are male respondents (41.2%). Most of Have PIPTN loan
the respondents fall within the age group of 30-39 Yes 169 67.6%
years (56.4%), followed by those aged from 20-29 No 81 32.4%
years (34.8%). Singles consist of 45.2% while the
rest are married. The majority of them hold a Normality test: The normality of all the variables
Bachelor’s degree and most of the respondents are was tested by assessing the skewness and kurtosis
earning between RM3001-6000 (48.4%) followed values. When data is normally distributed, the
by those earning between 6001-9000 (36.4%). A value of skewness and kurtosis are zero, as values
distribution of them graduated from public outside the range of +2 or -2 demonstrate
universities and had PIPTN loan. Table 1 below, considerable degrees of non-normality (George
shows the summary of the respondents’ profile. and Mallery, 2003). In this study, most of the
variables were inside the range of +2 or -2.

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 Edward Wong Sek Khin1, Account and Financial Management Journal ISSN: 2456-3374 2017
Impact Factor: 4.614
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Table 2: Normality test Hypothesis 1: Attitude towards education loan

Variable Skewness Kurtosis repayment has a positive relationship with
AA1 0.189 -0.778 intention to repay PTPTN loan.
AA2 -0.193 -0.202 Hypothesis 2: Awareness of PTPTN issues
AA3 -0.146 -0.689 created by the media has a positive relationship
AA4 -0.258 -0.279 with intention to repay PTPTN loan.
AA5 0.290 -0.911
AC1 0.028 -0.258 Hypothesis 3: Perceived affordability of
AC2 0.000 2.278 repayment after graduating has a positively
AC3 0.066 -0.385 relationship with intention to repay PTPTN
PA1 0.709 0.670 loan.
PA2 0.620 0.719
PA3 0.639 0.311 Hypothesis 4: Perception towards loan agreement
PL1 0.642 0.334 has a positively relationship with intention to
PL2 0.201 0.515 repay PTPTN loan.
PL3 0.533 0.277
PL4 0.209 -0.176 Pearson correlation coefficient analysis was used
PL5 0.115 -0.252 to determine the relationship between attitude,
PL6 0.232 -0.260 awareness, perception of affordability, perception
PL7 0.072 -0.280
PL8 -0.203 -0.293 of loan agreement and education loan repayments.
The Pearson Correlation coefficient, which
Reliability test: Cronbach’s coefficient alpha was indicates the strength of relationship between the
used to measure the internal consistency of scale. variables. A correlation coefficient between 0.10
Its value ranges from 0-1. The tests of reliability and 0.29 indicate a small correlation, while a
were performed on all the measures used. Table 1 coefficient between 0.30 and 0.49 indicate a
below, summarized the Cronbach’s coefficient medium correlation and a coefficient between
alpha for each measure. A scale is reliable if the 0.50 and 1.0 indicate a large correlation (Sidin and
coefficient value is more than 0.600 (Hair et al., Zawawi, 2002).
1998). In this study, the Pearson Correlation
All the measures in this study were found coefficient (r) between dimensions of attitude,
to be reliable with the intention to leave scale awareness, perception of affordability, perception
having the highest coefficient alpha value of of loan agreement and education loan repayment
0.914. The measure having reliability coefficients for H1, H2, H3 and H4 were as follows:
lower than 0.700 was normative commitment. H1,β =0.320, p>0.05; H2,β = -0.031, p>0.05;
H3,β = -0.339, p>0.05 and H4,β = -0.331, p>0.05.
Table1. Reliability of measures Therefore, hypotheses H1, H3 and H4 were fully
supported.
No. Cronbach’s
Measure of Coefficient Table 2: Pearson correlation between all
items Alpha dimensions of variables
Attitude (A1) 5 0.897
0Attitude twd loan replayment 0.302
Awareness (A2) 3 0.806
Awareness of PTPN loan -0.031
Perception of 3 0.914
Perception of affordability 0.339
affordability (PA)
8
Perception of loan agreement 0.330
Perception of loan 0.879
agreement (PL)

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 Edward Wong Sek Khin1, Account and Financial Management Journal ISSN: 2456-3374 2017
Impact Factor: 4.614
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H1: Attitude towards education loan repayment RQ2: Do the graduates’ attitudes and
has a positive relationship with intention to repay perceptions towards PTPTN loans and the
PTPTN loan. Supported repayment of PTPTN loans affect the intention
H2: Awareness of PTPTN issues created by the to pay?
media has a relationship with intention to repay A Graduate’s attitude and perceptions towards the
PTPTN loan. Not Supported (Not Significant) PTPTN loan does affect the intention to repay.
H3: Perceived affordability of repayment after PTPTN needs to find ways to minimize the
graduating has a relationship with intention to negative perception associated with loan
repay PTPTN loan. Supported repayments. One of the possible ways is through
H4: Perception towards loan agreement has a collaboration with the other organizations or
relationship with intention to repay PTPTN loan institutions of higher learning in Malaysia, as well
Supported. as providing incentives, a more flexible repayment
schedule and taking sterner actions would
This research revealed that four of the determining
certainly deter defaulters and encourage more
factors that concern the attitude towards an
people to repay their loans
education loan repayment and perception of
affordability of loan repayment, will affect the
quality of life after graduation and perception Implications of these Research Findings
The findings from this study have revealed the
towards loan agreement. All of these independent
influencing factors of loan repayment intention. It
variables were supported the effective and
is hoped that the findings could assist the National
efficiency of education loan repayment program.
Higher Education Fund Corporation (PTPTN), to
further understand the borrower’s insights in
RQ1: What are the factors influencing intention
repaying the loans. PTPTN benefits would in
of loan repayment among graduates?
terms of the following:
There were three factors that influenced the
intention of loan repayments among graduates. a) The information would be useful to the
The factors identified are: attitude towards corporation to work together with the institutions
education loan repayment, the perception of of higher learning to carry out seminars, talks and
affordability of a loan repayment affects the other programs to change the mindset of the
quality of life after graduation and the perception students.
towards loan agreements. The perception of b) The policy makers and management of PTPTN
affordability and understanding the loan (Corporation) could the terms and conditions of
agreement was identified as the most crucial the loan agreement so that the students do not feel
factors that influenced a graduate’s intention of the immediate burden of repayments after
loan repayment. Therefore, it is important for graduating.
PTPTN to ensure that when making the loan to
explain to borrowers the terms regarding the loan c) PTPTN would be able to develop a more
agreement. PTPTN must spend more effort either comprehensive strategy to suit the market
to educate or simplify the agreement or both, so expectations and ensuring that the amount of loan
that borrowers understands the loan contract. approved is adequate for borrowers.
PTPTN must also educate students the From the Ministry of Higher Education point of
implications for failing to repay the loans. As for view, the findings from this study could assist in
students, proper financial planning is important to the formulation and implementation of new
ensure that they are not trapped in debt. financial policies and the aid in the direction of
794 Volume 2 Issue 6 June 2017
DOI: 10.18535/afmj/v2i6.05
Page : 788-797
 Edward Wong Sek Khin1, Account and Financial Management Journal ISSN: 2456-3374 2017
Impact Factor: 4.614
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higher education in Malaysia. This will help to education as shown in table 3.

turn Malaysia into a premier destination for higher

Table 3: Summary of the findings

Problem Statement Research Research Hypotheses Findings
Questions Objectives
The number of student a)What are the a) To discover the H1: Attitude H1: Supported due to
taking up PTPTN loans factors influencing factors that influences towards education significant finding
is increasing year after intention of loan the intention of loan loan repayment based on the analysis
year, it is important for re-payment among repayment among has a positive conducted (β = 0.302,
PTPTN funding to be graduates? graduates. relationship with p<0.05).
replenished and have intention to repay
sufficient funding for b) To determine the PTPTN loan.
future generations. b) Do the relationship between H2: Not supported
However, due to the graduates’attitudes graduates' attitudes H2: Awareness of due to insignificant
undistinguished and perceptions and graduates' PTPTN issues by finding based on the
repayments among towards PTPTN perception towards the media has a analysis conducted
graduates, it will have loan and the intention of PTPTN relationship with (β= -0.031, p>0.05).
an immediate impact on repayment of loans repayment. intention to repay
PTPTN running out of PTPTN loan affect PTPTN loan.
funds for future the intention to c) To examine the H3: Supported due to
students pay? effect of graduates’ H3: Perceived significant finding
attitudes and affordability of based on the analysis
perceptions on the repayment after conducted (β = 0.339,
intention to repay graduating has a p<0.05)
education loans. relationship with
intention to repay
PTPTN loan.
H4: Perception H4: Supported due to
towards loan significant finding
agreement has a based on the analysis
relationship with conducted (β = 0.330,
intention to repay p<0.05)
PTPTN loan.

Suggestion for future research Conclusion

From the Malaysia’s context, more studies and Based on the findings derived from this study a
research need to be done to determine other few recommendations can be proposed in terms of
potential variables that would influence the loan pragmatism. Firstly, the findings useful for
repayment intention. As Malaysia is a multiracial PTPTN in terms of revealing factors that influence
country and enjoys a diverse culture, studies the behavior and attitude of graduates to so that
dealing with the influences of other demographic the PTPTN better understands the problems of
factors, such as religion and location, on the non-repayment of educational loan among
subject matter are needed. Malaysian student clients. PTPTN together with
the educational institutions must educate and
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 Edward Wong Sek Khin1, Account and Financial Management Journal ISSN: 2456-3374 2017
Impact Factor: 4.614
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Impact Factor: 4.614
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