National Higher Education Fund Corporation (PTPTN) loan borrowers can expect a 20 per cent discount if they repay their loans in full by March 31 next year.
Those who are unable to do so can still get a 10 per cent off their loans if they make continuous payments for 12 months until Dec 31, 2015.
Prime Minister Datuk Seri Najib Tun Razak said the discounts were meant to encourage repayment, and some 174,000 borrowers had not made any payments since 2010.
"Since the establishment of PTPTN in 1997 to date, 2.1 million borrowers have taken loans worth RM47.8 billion (S$18.7 billion).
"However, as at Aug 31 this year, only RM5.36 billion or 46 per cent of RM11.76 billion has been collected," he said when tabling the Budget 2015 in Parliament.
Najib said the minimum English proficiency requirement for entering public tertiary institutions would be raised according to field of study from next year onwards.
For example, Arts and Social Science courses will require a Band 2 in the Malaysian University English Test (Muet), while Law and Medical courses will require at least a Band 4.
Currently students only need a minimum of Band 1 in Muet to enter local universities.
Najib also announced a RM1.2 billion allocation to upgrade and increase student intake to vocational and community colleges.
"Currently, applications for entry into Technical and Vocational Training (TEVT) programmes received by the Education Ministry far exceed the capacity of 20,000 places.