How Does An Education Loan Work In Singapore?

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Written By Loanbuddy Singapore
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How Does An Education Loan Work In Singapore?

The world knows how Singaporeans are hardworking, goal-driven, and passionate about taking their career to the next level. If your aspiration is to get a decent job to attain a preferred lifestyle in Singapore, you must focus on high-quality education to get there.

Varying from course to course, a student in Singapore typically needs around $10,000 to $32,000 to get a complete degree in four years. Even families who are saving money for their children’s education will need financial assistance to fund the course and additional expenses.

This is where taking an education loan or a student loan becomes important. By the end of this article, you will get to know how a student loan works in Singapore and how you can choose the suitable option before making any decision.

What is a student loan in Singapore?

An education loan in Singapore helps students to finance their higher education. A student can utilize it to pay tuition fees, accommodation, books, and living expenses. The amount borrowed under an education loan is usually repaid after graduation is completed with a tenure of up to 12 years. Student loans have lower interest rates and flexible terms as compared to other types of loans in Singapore.

There are mostly three types of education loans available in Singapore:

  • CPF education loan
  • Ministry of Education (MOE) tuition fee loan
  • Bank education loan or FI education loan

What are the requirements to apply for a CPF education loan?

The CPF (Central Provident Fund) education loan is a government-financed scheme that provides financial assistance exclusively to Singaporean citizens or permanent resident students pursuing their first undergraduate degree.

You can use your parents’ CPF OA balances and fund your college fees up to 100%. The loan repayment starts one year after graduation or after the termination of studies. The interest rate charged under a CPF education loan is 2.5% which is lower than what usual other options offer. You need to fit into the following eligibility criteria to get a CPF education loan:

  • Only for approved universities– You must get enrollment from a local university approved by the CPF. A few of these colleges such as the SIT, SUSS, NAFA, SMU, and SUTD are autonomous colleges. Besides these, universities under the Polytechnic-Foreign Specialized Institution Framework are also listed by the CPF to get a CPF education loan.
  • Prerequisite of the course– You need to fund some percentage of your educational expenses yourself if you are enrolled in a course even if you are eligible for the CPF education loan. A 50% of your parent’s CPF OA balance can only be withdrawn if you are studying in any arts college in Singapore. Whereas, if you are studying in a polytechnic or for getting a technical degree or diploma, the withdrawal limit is restricted to only up to 25% of the CPF OA balance. You must ensure which percentage applies to your choice of course.
  • Restrictions on withdrawal– If your parents have already exhausted the limit to withdraw from CPF OA or the account simply does not hold enough money, you can’t get an education loan through the CPF education scheme.
  • Other criteria– You cannot get a CPF education loan if you want to pursue a part-time course or diploma. You also cannot apply for a CPF loan if you have already taken a subsidized first degree. In addition, a foreign student cannot apply for a CPF education loan as it is offered exclusively to Singaporeans only.

How does the CPF Education loan work?

As said, the repayment under the CPF education loan begins after one graduation or termination of studies whichever falls earlier.

The CPF authority will send you the repayment notification three months before the repayment period commences. However, you can opt for early repayment and talk with the CPF regarding this.

The maximum repayment period is 12 years to pay month on month or as a lump sum amount. Be noted that you cannot use your own CPF OA to pay off the borrowed amount under your parents’ CPF OA.

What is the MOE Tuition fee loan and how does it work?

The tuition fee loan offered by the MOE in Singapore is another way to finance your education if you don’t qualify for the CPF education loan. You can fund up to 90% of your tuition fees under this loan. The good thing about this loan is that you don’t have to pay any interest or installments during your studies. This way you can fully concentrate on your studies without having to worry about money. After 2 years of graduation, you can repay it.

However, you still get the option to pay the amount you owe during your studies. If you opt to pay it off during your course, the interest rate will be lower as compared to the rates after 2 years of graduation.

What are the education loans issued by banks and financial institutions and how do they work?

Students who want to study at private colleges or abroad can apply for education loans from banks or financial institutions. You need to be at least 21 years old to apply or have a co-applicant, sponsor, or guarantor to qualify for an education loan from banks or FIs.

Banks ask the applicant’s income or the sponsor’s/ guarantor’s income to range between $12,000 and $30,000. The loan tenure offered by banks typically can go up to 10 years. You have the option to pay the accrued interest during your studies or installments along with interest.

Compare the Best Student and Education Loans in Singapore (January 2024). Click Here to Read.

Government loan schemes

Government loan schemes, such as Tuition Fee Loan and Study Loan, are available to help students finance their diploma, undergraduate or postgraduate programmes. Learn if you are eligible and the loan quantum.

Tuition Fee Loan

Students in polytechnics and autonomous universities can apply for the Tuition Fee Loan to cover a certain percentage of their tuition fee. Learn about the eligibility criteria and how to apply.

  • Who is eligible

Students who are studying full-time in any of the polytechnics.

Students who are studying full-time subsidised undergraduate and postgraduate programmes in the autonomous universities.

Singapore Citizen students who are studying part-time subsidised undergraduate programmes in the autonomous universities.

  • How it works

The Tuition Fee Loan covers:

Up to 75% of subsidised fees payable by polytechnic students.

Up to 90% of the subsidised Singapore Citizen fees payable by university students.

The loan is tenable for the entire course duration. It is interest-free during the course of study, with interest only commencing upon graduation. The maximum loan repayment period is up to 10 years for loans taken at polytechnic level, and up to 20 years for loans taken at the university level.

  • How to apply

Students in Singapore Management University (SMU) can approach the institution.

Students in Nanyang Technological University (NTU) or National University of Singapore (NUS) can approach DBS or OCBC.

All other students can approach DBS.

Study Loan

Students who have taken up maximum of the Tuition Fee Loan, and with gross monthly per capita income of $2,700 or less, can apply for the Study Loan to finance the remaining fees. Learn about the eligibility criteria and how to apply.

  • Who is eligible

Diploma students who:

Are Singapore Citizens or Permanent Residents taking full-time diploma courses at local polytechnics.

Have taken up maximum loan under the Tuition Fee Loan scheme, or other loans and fee subsidies that cover up to 75% of tuition fees payable.

Have a gross monthly per capita income of $2,700 or less.

Undergraduate students who:

Are Singapore Citizens (SC), Permanent Residents (PR) or international students taking full-time subsidised undergraduate courses, or SCs taking part-time subsidised undergraduate courses.

Have taken up maximum loan under the Tuition Fee Loan scheme, or other loans and fee subsidies that cover up to 90% of tuition fees payable.

Have a gross monthly per capita income of $2,700 or less for SCs and PRs, or $1,200 or less for international students.

  • How it works

The Study Loan covers:

Up to 25% of subsidised fees payable and a living allowance loan of $2,000 per year for polytechnic students.

Up to 10% of the subsidised Singapore Citizen fees payable and a living allowance loan of $3,600 per year for university students.

The loan is tenable for the entire course duration.

For students with monthly household per capita income of $950 or less, the loan is interest-free.

For students with monthly household per capita income between $951 and $2,700, the loan is only interest-free during the course of study, with interest only commencing upon graduation.

For interest-bearing study loans, the maximum loan repayment period is up to 5 years for loans taken at polytechnic level, and up to 20 years for loans taken at the university level. For interest-free study loans, the maximum loan repayment period is up to 2 years for loans taken at polytechnic level, and up to 5 years for loans taken at the university level.

  • How to apply

Students can approach the respective institutions for application.

Reference and Source: https://www.moe.gov.sg/financial-matters/government-loan-schemes

Summary

Education is not a privilege but a right. Thus the government of Singapore issues loan schemes from time to time to fund students’ tuition fees. Someone who does not qualify for the CPF or MOE tuition loan can easily apply to a bank or a financial institution. The borrowing limits are also not set by the authorities to make the loan viable for all citizens and residents.

If you want to seamlessly apply for an education loan in Singapore, get a free assessment on your loan to avoid any errors in your application. Contact LoanBuddy to learn about attractive interest rates offered by different banks and financial institutions.

What are the Advantages and Disadvantages of an Education Loan in Singapore?

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