How Does Education Loans Work in Singapore

University Education is considered an important measure to attain a successful career not just in Singapore, but on a global scale as well.

Whether you decide to enroll in any of the local universities or a foreign university, the end goal is the same, to acquire a piece of paper that can launch your career in the right direction. However, acquiring a degree is not a walk in the park. You have to invest your time, hard work and of course money.

The most practical choice would be to enroll in a local public university. Although, this would still cost you at least a 5-figure sum at a bare minimum to earn your degree. Moreover, if you have plans on doing your studies abroad, it could cost you so much more.

For the less fortunate students, this means that they would have to resort to choosing which student loan Singapore provides is most suitable to their financial needs. But it begs the question, how can one do it and how much will it cost you?

What Types of Student Loans Are Available?

Before we proceed, it’s important to be knowledgeable about the various options of education loans Singapore has to offer. Currently, there are several types of education loans in Singapore.

CPF Education Scheme

The first and among the most popular education loans is the CPF Education Scheme. This education loan permits you to utilize your parents’ CPF to pay for up to 100% of your tuition fees on the condition that you must be studying for your first undergraduate degree in the following schools:

Nanyang Technological University (NTU)
National University of Singapore (NUS)
Singapore Management University (SMU)
Singapore Institute of Technology (SIT)
Singapore University of Technology and Design (SUTD)
Singapore University of Social Sciences (SUSS)
Nanyang Academy of Fine Arts (NAFA)
Lasalle
Institutions under the Polytechnic-Foreign Specialised Institution (“Poly-FSI”) Framework.

Features

Interest rate

The CPF Education Scheme is the most inexpensive study loan Singapore can provide for its university students. Its interest rate is parallel with the CPF Ordinary Account interest rate, which is at a 2.5% per annum, and does not cost as much as most education loan lenders and other financial institutions in the country have to offer.

Repayment

Repayment of the loan amount along with the interest rate for this type of study loan in Singapore will only start after a year the student graduates or leaves the university.

For a fair reason, a major number of university students opt to go for the CPF Education Scheme.

How much it can cover

There are still some essential conditions that you have to take note of. Be aware that even if you are in pursuance of one of the accredited courses for the CPF Education Scheme, you will still be expected to disburse a few of your personal funds if it so happens that you befall in some of these cases:

If you are studying in an art college, you can only withdraw up to 50% of your course fees.

If you are studying at a polytechnic or getting a Technical – Engineer Diploma or Technical Diploma in Culinary Arts at ITE, CPF Education Scheme will only give you permission to withdraw up to 25% of your course fees.

If you are studying at a university or foreign specialised institution under the Polytechnic-Foreign Specialised Institution framework, you will only be able to withdraw up to 10% of your course fees.

If your parents do not have sufficient funds in their CPF Ordinary Account, or have reached the Withdrawal Limit.

There are more reasons that you may be cause for ineligibility for the CPF Education Scheme. Reasons such as, not being enrolled on a full-time course or if you are only accomplishing a part-time diploma, if you are studying on a second undergraduate degree when you already finished a prior subsidised undergrad degree, and naturally, you will not be qualified if you are not a Singaporean citizen.

MOE Tuition Fee Loan

The next option you can ruminate over is the MOE Tuition Fee Loan, which entitles you to loan up to 90% of your university fee.

The MOE Tuition Fee Loan will not fix a charge for you while you are still studying, in contrast to most educational loans which will charge you the interest rate even before graduation, making the MOE Tuition Fee Loan a much affordable option than most of the education loans.

This education loan Singapore offers is available to all students enrolled in a local public university with the exclusion of those enrolled at NAFA and Lasalle.

In more fortunate cases, if you are capable of paying off the total loan amount of your MOE Tuition Fee Loan immediately after you finish your studies, the MOE Tuition Loan can be more cost-effective in relative to the CPF Education Scheme.

Features

Interest rate: The loan is tenable for the entire course duration. It is interest-free during the course of study, with interest only commencing upon graduation.
Repayment: The maximum loan repayment is up to 10 years for loans taken at polytechnic level, and up to 20 years for loans taken at the university level.
How much it can cover: The Tuition Fee Loan covers up to 75% of subsidised fees payable by polytechnic students and up to 90% of the subsidised Singapore Citizen fees payable by university students.

Bank Loan

The next best option worth considering is a Bank Loan. Banks frequently offer education loans for university students. That being the case, if you are not qualified for both CPF Education Scheme and Moe Tuition Fee Loan, you should consider heading to the bank and seek an education loan.

There are two classifications of loans available for students:

Flat-Rate. This type of loan is favorable if you want a stable payment amount because Flat-Rate loans have a fixed-term for the interest rate throughout your loan.
Monthly Rest option. Included in this loan option are your accommodation and daily living expenses, thus it has a lower or higher loan repayment amount and loan tenure, which is not consecutively the same.

Here are the best possible education loans with a 5 year loan tenure and SGD 20,000 loan amount offered by several banks in the country:

Education Plan	Place of Studies	Interest Rate (per annum)	Processing Fee (for approved loans)	Monthly Payment (SDG)
DBS Study or Education Loan	Local	4.38%	2.5%	$371.77
POSB Further Study Assist	Local	4.38%	2.5%	$371.77
OCBC FRANK Education Loan	Local	4.5%	2.5%	$372.86
Maybank Monthly Rest Education Loan	Local	4.45%	2%	$372.41
Maybank Monthly Rest Education Loan	Overseas	4.45%	1.5%	$372.41
RHB Monthly Rest Education Loan	Local	4.78%	2%	$375.41
RHB Monthly Rest Education Loan	Overseas	4.88%	2%	$376.33
CIMB Monthly Rest Education Loan	Local	5.39%	2%	$381.01
CIMB Monthly Rest Education Loan	Overseas	5.39%	2%	$381.01

Note: All of the banks listed above have 5 years for their loan tenure. However, some banks and financial institutions in Singapore can extend your loan tenure for up to 10 years. Additionally, your loan repayment won’t begin until after you completed your degree (1 to 2 years) and secured a signed contract that certifies you are employed and have a source for annual income.

Tip: If you are considering an education loan through banking institutions, you need to check and browse through bank financial offers often. Banks in Singapore can adjust and change their interest rates for the loan schemes they offer, contingent to the market’s demand. Although this may not usually occur because Singaporeans are known to greatly value education.

However, in some instances, banks and other financial institutions can lower the interest rate. Said interest rate ranges from 3%-6% per annum and with a possibility of an 8% effective interest rate.

So make sure to take advantage of these possible lower interest rates. In this fashion, you can compare and determine the best loan amount, interest rate, loan tenure, and minimum annual income requirements for your guarantor, in the market.

It may take some effort, but regularly taking note of the new and current loan schemes provided by various financial institutions prove to be more rewarding to students and their guarantor.

Other fees and charges

If you refer to the table above as reference, these bank loans oblige applicants with a processing fee ranging from 1.5% up to 2.5% of your loan amount. On the bright side, the processing fee is deducted from your first loan repayment, which is a small advance to pay for your loan.

Furthermore, there are other interest and fees that you should familiarize yourself with, such as the education loan penalty, cancellation penalty, and disbursement fees:

An advance payment penalty priced at 1% of the original loan amount
Partial prepayment penalty of 1% of the initial loan amount
A cancellation fee of 1% of the agreed upon loan amount
Disbursement fee, which will depend on your mode of payment (cash, credit, installment, etc.)

Eligibility

Must be at least 21 years old.
If you are younger, you are required to bring with you a guarantor, co-applicant, or a sponsor who should also be at least 21 years old.
You or your guarantor/co-applicant/sponsor should meet the bank’s minimum income requirement which is SGD 30,000 for most loans.

On the off chance that your guarantor/co-applicant/sponsor does not meet the required annual income or minimum income of the bank, you are allowed to present two people as your guarantor. An example of this is that both of your parents can act as your guarantor.

Required documents

Your latest e-statement
A CPF contribution history statement in the recent/past 12 months
A Letter of admission from the local or foreign school you are enrolled in
The finished application the student has signed and accomplished.

Can I Take 2 Education Loans?

The answer to this is not definite. Generally speaking, it is possible for some banks to allow taking out 2 loans at the same time. However, it is not advisable to overestimate your repayment abilities. This will mean another debt to worry about. As the popular saying goes, “Don’t bite off more than you chew”, which is something you should reflect on if you are thinking of acquiring 2 loans at the same time.

Personal Loan from a Licensed Money Lender

The last alternate option is for you to apply for a best personal loan from a Licensed Money Lender. Applying for personal loans from a licensed money lender can possibly be one of the best options you have to finance for your education. Licensed Money Lenders intend to provide comparatively better alternatives to bank loans. They can provide:

Lower interest rate in relative to a banking institution
Shorter loan repayment or loan tenure (you can choose to complete the repayment period usually within 1 year)
Minimal of Credit Scores Required (As banks usually favor loan applicants or borrowers who maintain high credit scores)

If you want more information about how this type of loan works, we recommend Singapore’s best-licensed money lender Bugis Credit. Bugis Credit offers you safe, reliable, and efficient loan approvals. They have been operating for years and are licensed and regulated under the Ministry of Law. Visit their website to learn more about their offers and to get started on your financing!

Why Should I Repay My Student Loan as Quickly as Possible

Educational Loans are still borrowed financing. Missing repayment deadlines will most possibly incur more penalties, so paying your estimated interest rate and loan amount as soon as possible should be your priority.

If you’re not comfortable in handling loans and possible lifelong debt, you should consider acquiring only a few or a single financial commitment and prioritize your debt-payments.

How to Manage Our Debts? Consider Calculating Your Debt-To-Income Ratio

To help yourself in paying your loans, you should always consider your debt-to-income ratio or DTI ratio. A debt-to-income ratio calculates your possible debt commitments by gathering your financial information such as your annual income, maintaining credit score, and what type of loan you desire.

Formula: DTI=Gross monthly income/ total of monthly debt payments x 100

Lenders prefer a debt-to-income ratio smaller than 36%. A high DTI ratio shows that an individual has too much debt for the amount of income earned each month.

Closing

You might’ve felt overwhelmed or intimidated by the concept of borrowing for the sake of your studies, but in making sure that you can manage your finances, you can definitely assure yourself that it will go smoothly and reduce the stress of thinking about loan payments.

The most important thing to note is that if you can arrange and plan your financial concerns properly, paying for your loan can never be a problem.