University loans, much like private tuition rates nowadays, don’t come cheap. But it is every Singaporean parent’s dream to send their kids to university.
Higher education in Singapore can set one up for a career of your choice. After a few years of focused studies, university graduates enjoy higher income, higher job benefits and more advancement opportunities than others.
But when it comes down to financing your child’s education in Singapore, things may seem daunting. Tuition fees can cost anywhere from $20,000 to $200,000 depending on whether you want to study in any of the top schools in Singapore or abroad.
But study loans have made it possible to afford such tuition fees, even when you don’t have upfront savings.
What is a study loan?
A Singapore study loan is money borrowed from the government or a private lender in order to pay for education. This loan has to be paid back later, along with the interest that can build up over time. The money can usually be used for tuition, room and board accommodation, books, or other fees.
How Study Loan Works in Singapore?
A student loan is a type of financial assistance for students that aids them in paying for the cost of post-secondary education and related fees, such as tuition, books and supplies, and living expenses.
When selecting the student loan that you would eventually be paying off in the future, you should check out the different terms involved in the student loan and compare that with your potential repayment ability.
Best Study Loans in Singapore
CPF Education Loan
For Singaporean students who have not entered the workforce, one of the most accessible options is to ask if your parents can pay for your education using their Ordinary Account (OA). This is because the interest rate is relatively low at 2.5%.
This option is for subsidised admission costs for full-time degrees from approved educational institutions. For other courses and programmes, you may only receive partial funding.
You can also ask your spouse or siblings, but the condition is that the ordinary account must have sufficient funds and an available withdrawal limit, and that you have a tuition grant from the government.
Do note that it is not “free money”. The OA account holder will have deductions to his or her account and interest will also accumulate once the loan is withdrawn. So, you will need to start repaying the loan, either in monthly installments or in a lump sum, upon graduation up to one year after graduation or at the end of your last term.
Non-Singaporean students will require a guarantor. Applying is easy as you just have to do it with your SingPass.
MOE Tuition Student Loan
Another option is to apply for the MOE Tuition Student Loan. It can fund up to 90% of the admission cost for university students, and up to 75% subsidised fees for polytechnic students.
It has a 0% interest rate until the student graduates. This is available for all students studying at all local universities, excluding NAFA and Lasalle.
You will have to start repaying two years post graduation, either through monthly installments or in a lump sum. The maximum period of time to repay is 20 years for university students and 10 years for polytechnic students.
DBS study loan
DBS, the household name for a local bank, has a DBS study loan. You can borrow up to 20% of the subsidised tuition fees payable by Singaporean students and, or, also receive up to $3,600 annual living allowance. For polytechnic students, you can borrow up to 25% of the subsidised tuition fees and, or, up to $2,000 annual living allowance.
The loan charges zero interest when you are studying (up to five years), so you don’t have to worry about the compounding interest when you don’t yet have a job.
You have up to 20 years of repayment period for interest bearing loan and if you are paying the loan back monthly, the minimum monthly repayment must be at least $100.
The interest rate is based on the average prime lending rate of DBS, OCBC and UOB, which is currently at 5% as of 21 Dec, 2020.
POSB Further Assist
POSB, another household name, has a Further Assist study loan, which allows you to loan up to $160,000 or 10 times the combined monthly income of you and your guarantor, along with a 10 years repayment period.
This is more for people who are already working though, as you need to have a minimum annual income of $18,000. You’ll also need to have a guarantor between ages 21 and 60 and is not an undischarged bankrupt. The interest rate is 4.38%.
OCBC Frank Education Loan
OCBC’s Education Loan can cover as much as $150,000 or 10 times your monthly income (whichever is lower). The interest rate is 4.5% p.a.
One thing interesting about the OCBC Frank Education loan is that there are three repayment methods: Standard, Graduated, or Graduate Plus.
Basically, the tiers just depend on how much you can afford to repay during study and when you graduate.
- Standard is where you make payments towards your principal and interest once your loan is disbursed, in monthly installments. The effective interest rate is 5.17%,
- Graduated is where you pay only the interest while studying and pay the principal plus interest after graduation. The effective interest rate is 5.06%
- Graduate Plus allows you to pay only the interest while studying with an additional one year after graduation. The principal and interest can be paid from the third year onwards. The effective interest rate is 5.01%.
Maybank Education Loan
For Maybank’s educational loan, you can loan up to $200,000 or up to eight times of your monthly income, whichever is lower. The interest rates start from 4.45% p.a. The repayment period is up to 10 years and you can use it for both local and overseas studies.
For part-time students, they must earn at least $18,000 in annual income. You can also use it to finance education-related expenses such as accommodation, computer equipment and books.
CIMB Education Loan
CIMB’s education loan is designed for Singaporeans who earn at least $2,000 a month. The income falls short, the lender must have a guarantor who is at least 21 years old with a monthly income of minimum $2,000. The loan must be not more than eight times of your monthly income. For those who need to borrow more, a guarantor is required. The interest rate starts from 4.78% p.a.
RHB Education Loan
The RHB Educational Loan offers a loan as high as $100,000 or at least 6 times your monthly income. There are also flexible repayment schemes, like OCBC Frank and CIMB. The base interest rate starts from 4.78% p.a., and the repayment period is up to 10 years.
Individual applicants must earn an annual income of $30,000, or earn at least $12,000 and apply with a guarantor that earns $30,000 annually.
Things to consider before getting a study loan Singapore
Here are the three main things to consider before taking a study loan from a bank:
Loan Amount – Determine the maximum and minimum amount that you can borrow from the bank for the education loan. This way, you will know if it’s enough to cover your tuition and if you can pay it back in the future.
Loan Tenure – On average, the maximum loan tenure for an education loan is 10 years. The maximum loan tenure for an education loan is usually from 8 to 10 years, while the minimum is 1 year. This would give you an idea of how long you would have to pay for the loan and budget your money accordingly.
Repayment Schedule – It’s important to know when you would need to repay your education loan and by how much. There are some loans that only require you to pay the interest rate during your stay in college and will only demand payment of the principal amount sometime after your graduation.
Because of the expensive costs that come with attaining a university education, many students choose to apply for student loans. But before you commit to an obligation, it’s important to choose the education loan that is right for you. Learn as much as you can about the loan and what goes with it such as the interest rate, fees and charges, and loan tenure.
If you’re not eligible for a study loan or the amount is not enough to cover your tuition fees, you should apply for personal loan from licensed money lender singapore to get approved for a loan quickly.