Education

5 Things to Consider Before Taking Up an Education Loan

5 things to consider before taking education loan singapore

Joanne Poh

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Don’t choose an education loan the way Singaporeans choose what tertiary courses to enrol in—by choosing the hardest one to get into. That’s not the way it works. Just because a bank tells you’ll be approved for an education loan doesn’t necessarily mean taking it up is a good idea.

Whether you believe those reports about degrees being obsolete or are adamant that degree holders do indeed earn more, think about your own reasons for wanting to further your studies instead of just following the crowd or listening to your banker. After all, there’s no point in paying more for an education if you’re incapable of independent thought, right? Here are some questions to ask yourself.

1. To what extent will it boost your income?

When people look at their peers with what they perceive as better jobs, they often inflate salaries in their mind. This is exacerbated by the fact that money is such a sensitive issue that few people have a truly accurate idea of what people earn.

For example, if a car salesman shows up in a $1,000 Prada shirt, his friends start thinking that oh, he must be earning at least $15,000 or more—and that means all car salesmen must earn that amount.

That’s not how you should be doing research on your future career. Ask friends (or friends of parents) with senior positions in the industries you’re targeting questions about the job. Find out the market rate for jobs not only in top tier organisations but also SMEs in the industry. Then compare your projected earnings with what you would be earning if you didn’t further your studies.

Marcia, a 30-year-old vice president at a multinational bank in Singapore, thought of getting an MBA after graduating from university at 22 with an arts degree. However, a family friend offered her a job in the operations department at a multinational bank and Marcia decided to take the job and put her studies on hold. Fast-forward 8 years and she has done very well for herself with a five figure monthly salary.

“My first job opportunity came at the right time. Because they were paying above the market rate, I thought that furthering my studies would not be financially justifiable. In the past eight years I would say I have been very lucky and have progressed much faster than most of my peers. I’m at the point where the value of the MBA is much lower to me than it was before, so I don’t think I’ll ever go for it,” says Marcia.

2. What’s the market like in your chosen industry?

You might be set on becoming an investment banker or lawyer. However, just because there are a rarefied few who are earning big bucks in a certain industry, that doesn’t mean you will necessarily get there as soon as you think.

Research the market in your chosen industry—are employers facing a shortage of qualified candidates or is the market already saturated?

Singapore has too many lawyers right now, so if you go to law school you might not be able to procure a job as a lawyer when you return. Is that a risk you’re willing to take?

3. Do you have alternative careers if your plan falls through?

If your only purpose of getting a degree in agriculture in poultry management is to work at the Seng Choon Egg Farm, then you might be putting all your eggs in one basket.

When assessing the value of taking a particular course, consider the alternatives if your Plan A falls through.

31-year-old engineering graduate Ian chose to study engineering in Australia, although he now works in finance. “I didn’t really know if I wanted to be an engineer, but I also heard banks liked to hire engineering graduates, so it was a safe choice,” he says.

4. What is the total cost and is it worth it?

Ask any university graduate and they’re unlikely to be able to tell you exactly how much their education cost. But ask these same people how much a cocktail at Overeasy is and they can probably get it right. Don’t let that happen to you.

You need to consider not only the cost of your tuition fees for the duration of your course but also the cost of your education loan.

Calculate the cost of interest as well as additional fees and charges and add that to your total sum. Check out MoneySmart’s education loan selector to see the interest rates of various education loans in Singapore.

5. Are there cheaper ways you can acquire the same skills?

If you’ve done the math and have decided that you’re not prepared to shell out the cash right here and now, all is not lost. A bit of resourcefulness might be able to help you acquire the necessary skills without going back to school immediately. It might take longer, but you’ll get there.

Aaron, a 35-year-old journalist, decided to go to polytechnic after completing his A levels instead of going straight to an overseas university. After obtaining his diploma, he was able to obtain a bachelor’s degree in Australia in just 1.5 years instead of the usual 3 years it would have taken.

“When I didn’t do well for my A levels, my first thought was to go overseas immediately after NS, like many of my ex-classmates were doing. But the cost of getting a 3-year degree held me back, and I decided to go to poly instead. It was a great learning experience and went I finally went to uni I was actually ahead of many of my classmates, who mostly had no practical skills,” says Aaron. 

Are you thinking of furthering your studies? What are some of the factors affecting your decision? Let us know in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.