Penang to take loan defaulters to court

Fed up with study loan defaulters who don’t pay up, the Penang government has warned borrowers to settle outstanding sums or face court action.

"We cannot afford to have millions (of ringgit) in study-loan arrears for not only does it affect the state coffers, it also deprives deserving students of financial help due to lack of funds," Penang Chief Minister Lim Guan Eng told reporters in George Town.

Lim warned that his administration would take tough action and even loan guarantors could expect to be hauled up to court.

Apart from legal action, Lim said the names of defaulters would also be permanently published on the state’s official website for public perusal.

Past approach 'too soft'

He blamed the previous state government, led by Gerakan supremo Koh Tsu Koon, for not acting sooner.

Lim, whose Pakatan Rakyat opposition alliance took over the state government after the March general election, said Koh’s (right) diplomatic and soft-spoken approach has not worked.

While some defaulters - from public and private tertiary insititutions - have repaid their loans, 3,416 defaulters still owe RM15.6 million to state, according to Lim.

However, the number is lower than three years ago when there were 4,860 defaulters owing a total of RM25 million, he acknowledged.

The loan scheme was started in 1970 by Dr Lim Chong Eu, who was then chief minister.

Under the scheme, students taking courses at tertiary level in Penang can apply for soft study loans of between RM2,000 and RM5,000 per year, depending on whether they are taking certificate or degree programmes.

Loans from RM2,000-4,500 are also available to eligible students taking distance learning and off-campus programmes.

The scheme is open to both Penang-born students and those born in other states but who have been studying in Penang for the preceding five years.

The annual interest is set at 2 percent for five years. Students are required to start repayments only after completing their studies.