Education

Getting an Education Loan in Singapore – Guide to Funding Your Tertiary Education

education loan singapore

Joanne Poh

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In Singapore, university is usually regarded as a stepping stone to a hopefully lucrative career. Whether you enrol in NUS, NTU, SMU, SIM, MDIS, PSB Academy or an overseas or foreign university, that piece of paper you graduate with at the end of your course is supposed to boost your earnings in some way.

But to earn money, you first need to spend money. University education, whether in Singapore or overseas, is not cheap.

Whether you’re going for the cheapest option by studying at a local public university or splashing out on an overseas stint, you’re looking at a five figure sum for your entire degree at a bare minimum, or even six figures for those heading abroad.

Unless your parents are footing the entire bill, that usually means taking out an education loan of some sort.

To estimate how much you’ll be paying for university, we’ve compiled a list of local public and private university fees here.

In general, local public uni students can expect to pay anywhere from $26,000 to $38,500 for their course fees (more if they’re in courses like law, music, dentistry or medicine), and $18,000 to $60,000 for private uni degree courses.

For those heading overseas, fees can range from nothing in countries where university is free like Norway or Austria, to a six figure sum for a degree in the USA or more expensive courses in Australia. You’ll also have to factor in the cost of your accommodation and living costs.

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Will you need to take out an education loan?

Those studying for their first undergraduate degree at the following schools are eligible for the CPF Education Scheme:

  • NTU
  • NUS
  • SMU
  • SIT
  • SUTD
  • SUSS
  • NAFA
  • LASALLE
  • Institutions under the Polytechnic-Foreign Specialised Institution (“Poly-FSI”) Framework.

The CPF Education Scheme enables you to use your parents’ CPF funds to pay for up to 100% of your course fees.

You will have to begin repaying the loan a year after you graduate or terminate your studies, whichever happens earlier.

The majority of local uni students opt for the CPF Education Scheme, and for good reason. The interest rate is pegged to the CPF Ordinary Account interest rate, which at 3.5% right now, is lower than most education loans offered by banks.

But more importantly, in most cases, the CPF Education Scheme is the cheapest financing option for university students in Singapore (other than the Mum & Dad scholarship, of course). In some limited cases, the MOE Tuition Fee Loan might be cheaper, but more on that later.

However, even if you are undertaking one of the courses approved for the CPF Education Scheme, you might still have to fork out some money out of pocket, such as if you are enrolled in any of these courses:

  • You are studying in an art college, in which case you can only withdraw up to 50% of your course fees.
  • You are studying at a polytechnic or getting a Technical – Engineer Diploma or Technical Diploma in Culinary Arts at ITE, in which case you can only withdraw up to 25% of your course fees.
  • You are studying at a university or foreign specialised institution under the Polytechnic-Foreign Specialised Institution framework, in which case you can only withdraw up to 10% of your course fees
  • Your parent does not have enough savings in their CPF Ordinary Account, or has reached the Withdrawal Limit of:
    • 40% of their accumulated OA savings or
    • all their remaining OA balance after withdrawing their savings reserved for housing / other schemes, whichever is lower.

You are also not eligible for the CPF Education Scheme if you are doing a part-time diploma or degree course, or if you are not eligible for subsidised fees (such as if you are undertaking a second undergraduate degree when you have already studied for a prior subsidised undergrad degree, or you are not a Singapore citizen).

If you are in a local uni but cannot/prefer not to participate in the CPF Education Scheme, you can also consider the MOE Tuition Fee Loan. This is open to local public uni students except those studying at NAFA and LASALLE.

This loan lets you borrow up to 90% of your tuition fees. No interest is charged while you are still studying.

In general, if you’re not using the CPF Education Scheme and the MOE Tuition Loan is available to you, it’s a good idea to take it up since you’re not charged interest while you’re studying (most education loans will charge you interest before you graduate). This makes MOE Tuition Fee Loans cheaper than regular education loans.

Do note that in some situations, the MOE Tuition Loan Fee can actually be even cheaper than the CPF Education Scheme, if you’re able to pay off your loan very very quickly after graduation. See this document from CPF for more information.

For students who don’t qualify for the CPF Education Scheme or the MOE Tuition Fee Loan (such as those undertaking private university degrees administered by, say, MDIS, PSB Academy or Kaplan, as well as those going overseas), they will have to turn to education loans offered by banks.

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How do you qualify for an education loan?

Generally, you need to be at least 21 years of age to apply for a study loan on your own.

If you’re under 21, you will need a guarantor, co-applicant or sponsor who is of age. Note that some banks also impose a maximum age on your guarantor/co-applicant/sponsor of, say, 60 or 65 years, so if a parent is going to be your guarantor you want to make sure they’re not too old.

You or your guarantor/co-applicant/sponsor will also have to meet the bank’s minimum income requirement. This can range from $12,000 to $30,000. This person’s income can also have an impact on how much you are allowed to borrow.

Note that unless the bank specifically requires it, your guarantor/co-applicant/sponsor does not need to be a parent or immediate family member.

Does your guarantor/co-applicant/sponsor not have a high enough income? You can have two people play this role. So, for instance, both your parents can apply together as your guarantors.

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What if you cannot repay your education loan?

In a best case scenario, you’ll graduate from your course with excellent grades, have a cushy job waiting for you and start earning big bucks. You’ll thus have no problem paying off your monthly loan instalments.

But things don’t always go to plan, and in certain unfortunate circumstances, you might not be able to pay back the loan, such as if you drop out of your course or do not manage to secure a decent job for a long time after graduation.

Now, assuming you took out your loan for an undergraduate degree and have never worked before, the bank already knows you’re broke. But they also know your guarantor isn’t.

So if you cannot pay back your loan, the bank is likely to go after your guarantor and try to collect the money from them.

And if the loan repayments still don’t get made, the bank can take legal action against both you and your guarantor. As education loans are generally unsecured loans, so you will not lose any collateral to the bank.

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Which education loan should you choose?

There are a ton of education loans in Singapore, and they differ in more ways than just interest rates.

Here’s what to look out for when comparing loans.

  • Loan quantum: Check that the minimum and maximum amount of money that you can borrow enable you to take out the sum you need.
  • Interest rate while you’re studying and after you gradate: Obviously, the lower the interest rate, the cheaper the loan is for you. You can compare education loan interest rates for free on MoneySmart. The interest rate charged by the bank while you’re still studying can differ from what you’re charged when you’ve graduated if you opt for an interest-only loan (more on that later).
  • Tenure: The maximum loan tenure tends to be from 8 to 10 years, while the minimum tends to be 1 year.
  • Repayment schedule: One of the most important factors is when you need to repay your loan. Monthly rest loans (which are also the cheapest) will require you to begin making loan or at least interest repayments while you’re still studying. Interest-only loans (which are comparatively much more expensive) will only require you to pay back the loan when you’ve completed your course. Hence, monthly instalments you’ve got to make while you’re still enrolled might differ from those that must be made when you’ve graduated.
  • Prepayment penalty: If you manage to get a well-paying job, you’ll probably want to try to pay off your student loans as soon as possible. Most loans will impose a prepayment penalty if you pay off the loan early, so you’ll want to compare these.
  • Other fees: A processing fee of about 2% is usually charged. Doesn’t hurt to compare.

Before committing to an education loan, you’ll want to compare loans and pick the one that will cost you the least.

Unless you have absolutely no way to pay back a few hundred dollars a month while you’re studying, you should pick monthly rest loans over interest-only ones.

Monthly rest loans will require you to start paying back your loans with interest while you’re still at school, but will cost you much less in the long run than interest-only loans, which enable you to repay only interest while you’re at school and defer the bulk of your loan repayments till graduation.

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Comparison of education loans in Singapore

Here are the monthly rest loans on offer in Singapore right now. All figures have been calculated based on a $20,000 loan over 5 years.

Bank

Interest rate

Monthly installment  (based on $20,000 over 5 years)

Processing fee

Maximum loan tenure

Pre-payment penalty

Other fees

OCBC FRANK Study Loan

4.5%

$373

2.5%, min $100

8 years

1%

$20 per cashier’s order or demand draft, $50 late payment fee

Maybank Monthly Rest Education Loan

4.78% (local studies), 4.88% (overseas studies)

$375 (local studies)

2%

8 years

1%

Late payment fee currently 7.78%

RHB Monthly Rest Education Loan

4.78% (local studies), 4.88% (overseas studies)

$375 (local studies)

2%

10 years

1%

Late payment fee currently  10.7%

POSB Further Study Assist

5.88%, 4.6% if studying in preferred institution*

$386 (non-preferred institution)

3%

5 years

None

$30 late payment fee

CIMB Education Loan

5.39%

$423

2%

10 years

1%

$80 late payment fee

* BCA Academy, Nanyang Poly, NTU, NIE, NUS, Ngee Ann Poly, Republic Poly, SIT, SMU, Singapore Poly, SUSS, SUTD, Temasek Poly, Asian International College, Auston Institution of Management, Curtin Education Centre, ERC Institute, Informatics Academy, James Cook Australia Institute of Higher Learning, Kaplan Higher Education Academy, Kaplan Higher Education Institute, Kaplan Learning Institute, LASALLE, MDIS, NAFA, Nanyang Institute of Management, PSB Academy, SIM, TMC Academy, Trent Global College of Technology and Management

Verdict: As you can see, the OCBC FRANK Study Loan provides the most attractive interest rates.

However, this is offset somewhat by a slightly higher processing fee of 2.5%, and the fact that you’ll be charged $20 for each cashier’s order that is disbursed.

Therefore, you’ll want to compare this with the next best loan on the list, the Maybank one, which doesn’t charge for cashier’s orders and charges a lower processing fee of 2%, to see which would be more worthwhile for your loan amount and tenure.

(Note: The RHB loan offers the same interest rates as the Maybank one, but narrowly loses out due to their higher late payment charge.)

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A word on interest-only loans

For those who are not using the CPF Education Scheme or MOE Tuition Fee Loan, the loans listed above are your cheapest options.

However, some students still choose to go for interest-only education loans.

The main advantage of interest-only loans is that, while you’re still studying, you are only required to pay the interest on your loan rather than a full loan repayment of principal + interest. You only start repaying your principal sum when you’ve graduated.

The catch is that these loans are much more expensive in the long run. It also means your loan repayments are going to be very high when you graduate—you’re usually looking at a four figure sum. If you don’t secure a job soon after graduation, you could be in trouble.

Hence, it is wise to only opt for interest-only loans if you really have no way to repay your loans while you’re studying.

For instance, if you have zero income or savings with which you can repay your loans while studying, don’t intend to get a part time job, and your parents will not be helping out with your loan repayments, you may have no choice but to opt for an interest-only loan.

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Final note

If you are not using the CPF Education Scheme but are eligible for the MOE Tuition Fee Loan, you should opt for the latter as it will most definitely be cheaper than regular education loans.

However, for everyone else, the way to go is to sign up for a monthly rest education loan, with OCBC and Maybank leading the pack in terms of value.

Are you planning to take out an education loan? Share your concerns in the comments.

 

Related articles:

NUS, NTU, SMU & Other Singapore University Degrees – How Much Does It Cost in 2018?

6 Things You Should Know Before Taking an Education Loan

Australian Universities – How Much Does it Cost to Send Your Child There?

Can’t Afford to Go to University? Here are 9 Options for Getting Those Fees Paid

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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.