PUTRAJAYA (Aug 13, 2008) : University students who finance their studies with the National Higher Education Fund Corporation (PTPTN) loan have got reason to cheer -- the administrative cost or service charge for such loans has been drastically reduced.

The cabinet today decided that the charge will now be a flat 1%, instead of 3% for undergraduates and 5% for post-graduates, on the remaining loan balance.

This takes retrospective effect from June 1 this year.

Datuk Seri Khaled Nordin

Higher Education Minister Datuk Seri Khaled Nordin said the new decision will involve three groups of borrowers, namely new students who will be applying for loans which will be processed under the new system beginning December, existing borrowers and graduates who have yet to settle their repayments.

"For new students who have applied for loans before the new system is implemented, their applications will be processed and approved according to the current method. However, once the new system is ready, the adjustments will be made.

"As for existing borrowers and those who have graduated, the calculation method is, the outstanding loan before June 1 will be multiplied by 1% per year for the remaining repayment period," he said at a post-cabinet meeting.

There are 1.04 million existing PTPTN borrowers comprising diploma and bachelor’s degree students and 2,473 post-graduate students.

The period of loan repayment is based on the total loan taken, which is between five and 20 years for loans amounting to between RM10,000 and below to

RM50,000 and above, depending on the course of studies.

The service charge is calculated six months after completion of study or termination of loan as specified in the agreement.

Khaled said letters offering the new agreement will be sent out to existing borrowers (including those who have graduated) by early next year.

"They will be given a month from the date of the offer letter to complete the documents and return it to the PTPTN for the new rate to be enforced," he said.

The new decisions have been confirmed by the National Fatwa Council as in line with Syariah law.

In line with the decision to reduce the rate to 1%, Khaled said the ministry is studying the possibility of sponsoring Masters, PhD and professional-level students only for those in the strategic education fields.