Determinants of Educational Loan Repayment Performance among Malaysian Graduates

The default and low educational repayment rates in Malaysia have led to growing concerns regarding its impact on the loan provider’s sustainability and capability to provide financial aid to future students. Hence, this study examined the educational loan repayment behaviour by engaging the Theory of Reasoned Action (TRA) to explain the relationships of the determinants towards educational loan repayments and content it with the behavioural model, hyperbolic discounting. This study used a survey based on 391 graduates who are educational loan borrowers in Malaysia and are still obligated to repay their educational loans. Furthermore, experimental studies were conducted to do a robustness check on the presence of hyperbolic discounting using t-test. Meanwhile, the survey data were analysed using the Structural Equation Model (SEM). The study analysis showed that attitudes towards educational loan repayment behaviour, subjective norms and financial literacy were proven to associate with the intention to repay. Additionally, the variables were found to significantly impact the educational loan repayment behaviour through the mediating role of intention to repay. Furthermore, the findings found a negative association between hyperbolic discounting and repayment behaviour. Hyperbolic discounting also filled the gap for the discrepancy between intention and behaviour through its moderation role. The study’s findings could assist policymakers in planning strategies such as providing effective financial education to borrowers and socialising agents. Effective financial education could cultivate better educational loan repayment behaviour amongst the borrowers and increase their awareness of the importance of educational loan repayments towards the financial health of borrowers and the sustainability of educational loan providers