Financial Aid of Higher Education in Malaysia: A Study Loan Case

Abstract

The increment of financial expenses to study at higher education may concern all students and their parents. Not all parents are able to save enough money to bear the financial cost and thus making them apply for a study loan. Therefore, many private and government institutions offer an attractive loan to overcome this problem. Most of the finance institutions apply ordinary annuity method to calculate the installment and interest rate of the study loan. However, the mathematical model involved is a non-linear equation that causes the difficulty in calculating the interest rate. Thus, the main objective of this study is to solve a problematic situation to find the interest rate of a study loan based on Newton-Raphson method. By a scenario case, this method is found be a practical method, faster, more reliable, and produces accurate result in estimating the unknown interest rate. The method demonstrated in this study could provide a guideline for students or clients who need financial aid to higher education to find out the comprehensive and affordable interest rate. Hence, the clients or students could choose the best rate before proceeding the agreement of the loan for their further repayment in study loan.