How Does A Study Loan Work In Singapore?

Personal Finance

How Does A Study Loan Work In Singapore?

February 19, 2023

After excelling in your secondary education, you’re thrilled to join your dream college or university.

It’s an opportunity to study your dream career, get a job, and start earning. But tertiary education is expensive, and you or your parents may be short of funds.

That’s where education loans come in. They help you pay tuition fees and other costs while you study.

Here’s everything to know about how does a study loan work in Singapore.

What Is A Study Loan?

How does a study loan work? A study loan is financial aid provided by banks and financial institutions to students who need extra money to cover their tuition and other financial obligations while in school.

CPF Education Scheme

The CPF education scheme is the most common financing method for students in local public universities.

With a CPF education scheme, you can borrow even 100% of your study fee from your parent’s CFP Ordinary Account. Compared to bank loans, CPF education loans are more affordable as they have a lower interest rate of 2.5%.

You don’t have to repay your CPF loan immediately, but a year after your graduation or termination of studies.

That way, you have enough time to prepare to repay the loan. While you don’t necessarily have to start repaying your loan while studying, doing so can reduce your debt after graduation.

The interest charged is calculated on the amount you owe when you complete your studies.

Eligibility Criteria For CPF Education Scheme

Here are the conditions you must meet to qualify for a CPF education scheme in Singapore

  • You must be a first-time undergraduate student in local public universities: NASA, SUSS, Lasalle, NTU, SMU, NUS, SIT, SUTD, or institutions under the poly-FSI framework.
  • You must be a Singaporean citizen.
  • On the other hand, you can get disqualified because of the following:
  • Insufficient funds in your parent’s CPF ordinary account, or they have reached the highest withdrawal amount.
  • You are a part-time student in a college or university
  • You are a second-time undergraduate degree student and had subsidised your first degree with the CPF education scheme.

How Does The CPF Education Loan Repayment Work?

With the CPF education scheme, you’ll only repay your loan one year after graduation or terminating your studies.

Three months before making your first monthly installment, CPF will send you a repayment reminder. You can repay the loan monthly or as a lump sum throughout your loan tenure.

While CPF requires you to repay one year after graduation, you can start making monthly installments while studying. That way, you reduce the repayable amount since the interest is calculated on the amount you owe when you graduate.

What Is The MOE Tuition Fee Loan?

The MOE tuition fee loan is a financing aid by the ministry of education to Singapore students in public universities and colleges. It’s an excellent alternative if you don’t qualify for a CPF scheme loan.

You can finance up to 90% of your study fees with a MOE tuition fee loan. The advantage of this education loan is it doesn’t accrue interest while in school. You only start repaying two years after graduation.

The interest and the amount you repay are calculated based on the amount you owe at the time of starting repayment. If you start repaying the loan while studying, you’ll get low-interest rates since the amount owed is less.

Education Loans From Banks Or FIs

Bank loans are ideal for students in private universities or overseas since they don’t qualify for the CPF education scheme and MOE tuition fee loan.

To qualify for an education loan from banks, you must be 21 years or older. If you are under 21 years, have a guarantor, co-applicant or sponsor.

Your bank might need your income or your guarantor’s income to be $12,000 to $30,000 annually. Other banks might restrict your guarantors’ age.

Bank study loans have loan tenures from one year to 10 years. You can repay the interest accrued while still studying or the interest plus principal at once.

Here’s a roundup list of the best student education loans from banks in Singapore and their interest rates.

Name Of Student Loan From A Bank In SingaporeInterest Rate In Percentage (%)
Maybank Education Loan4.50-4.78
OCB Frank Education Loan4.50
CIMB Monthly Rest Education Loan5.39
RHB Monthly Rest Education Loan4.78
POSB Further Study Assist Loan4.38

What To Consider When Taking Out A Study Loan

With the many education loans, deciding which suits your financial needs can be challenging.

There are several factors to consider to get the best education loan. Here are the main issues to carefully check before getting a student loan.

Interest Rates And Processing Fees

How does a study loan work? A study loan is a type of loan that is designed to help students pay for their education expenses, such as tuition, fees, and living expenses. The loan is typically provided by a bank or other financial institution, and the student is required to repay the loan, with interest, after they graduate or leave school.

Interest rates and processing fees affect the loan due and the monthly installments you’ll make. Compare the interest rates and choose the lowest so you’ll repay less.

While processing fee can seem negligible – usually 1.5 to 2.5% – it cuts the amount disbursed, especially when borrowing a huge amount. Check the processing fee before getting an education loan.

Loan Tenure

CPF scheme, bank, and MOE tuition fees loans have varying repayment periods. CPF scheme has a loan tenure of 10 years, while the MOE tuition fee loan is up to 12 years. Banks have varying loan tenures. Check the repayment period, as it also affects your monthly installments. Choose one that fits you.

Repayment Mode

How does a study loan work? A study loan will have different repayment options depending on the lender. CPF scheme funds and MOE tuition fees allow one to repay their study loans after graduation or termination of studies.

With banks, you repay while studying, either on monthly rest or interest-only repayment mode. If you have savings, income, or a side business, take a loan that allows you to repay while studying. If you cannot repay while studying, choose an education loan that allows you to pay after graduation.

Minimum And Maximum Loan Amount

How does a study loan work? A study loan will have different loan amounts depending on the lender. You need a specific loan amount to finance your tuition, hostel charges, and extra needs during your studies.

Education loans have varying minimum and maximum amounts. Sometimes, a study loan might offer less than what you need.

When shopping for a student loan, check the minimum and maximum amount to ensure it can cover your expenditures.

Which Education Loan Do You Prefer?

With the three available education loans, you’re sure to make your educational dreams come true. You only have to choose one that fits your financial situation even in the long term.

If you need any financial aid, Credit Thirty3 is ready to help. Contact us for inquiries or apply for a loan on our website.