People define debts as good and bad ones. “Good debt” belongs to a loan for increasing income in the future. On the other hand, bad debts like credit cards, personal or installment loans belong to consumer loans. People use it to spend on shopping and satisfying individual desires and needs.
Education loans are considered good debt because students may increase future income and value after finishing college and finding a rewarding career.
Understanding Student Loans in Singapore
A student loan is a loan borrowed from the Government or moneylenders to pay for college studies, including tuition, room and board, textbooks, stationery, and study-related expenses.
The main difference between a student loan and other Government grants or scholarships is a student loan has to be paid back with interest specified in a period while grants and scholarships belong to “donation” and demand no return of the money.
Regarding the types of student loans available in Singapore, you should know each one’s essentials concerning interest costs and payment terms and find the most suitable one.
CPF Education Scheme
The scheme allows the applicant to borrow against the parents’ CPF account to pay 100% of tuition fees. Repayment begins one year after graduation. The applicant has more time to pay back the loan. The loan interest rate is as low as 2.5%
However, the interest costs will accumulate and increase once all the amounts are withdrawn from the Ordinary Account Saving. The scheme allows the applicant to repay earlier than specified.
MOE Tuition Fee Loan
The loan program also finances 90% of tuition fees and allows repayment of loans with interest two years after graduation. Also, you can repay the loan to save interest costs.
Education Loans from Banks/Financial Institutions (FI)
The loan programs offer flexible and various repayment terms for applicants. In general, an applicant has to consider several factors in choosing a loan program: 1. Interest rate, 2. Loan period: the maximum tenure is ten years), 3. Repayment schedules.
When choosing a repayment schedule, you have two types of plans: a. “Monthly rest loans,” allowing you to pay back while you study. b. “Interest-only” plan, which allows you to repay the loans after graduation. The latter proves expensive as it defers the payment of the loan.
You should note financial institutions like banks and government-sponsored plans have stringent requirements you have to meet to let you have their money:
- Age: If you are under 21 years old, you need a guarantor to commit the liability.
- Guarantor: The guarantor should have a good income and credit history.
Pros and Cons of a Student Loan
Pros
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More affordable
There is no doubt student loans give more people access to a college education. More and more students from lower-income households may not afford college tuition fees if they don’t have access to education loans. As a result of the loan service, most of them can get their dream jobs and get out of poverty.
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Life prospects
Students expect changes from further education. They do not need to wait for enough reserves and begin their college studies after a lengthy time of savings. Education loans shorten time paths to achieving life and career goals.
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Good credit records
An extra benefit is you can build up your personal credit history than earlier. A good credit history gives you a hand in achieving your goals in life and career. For example, you may need a mortgage to buy a house; banks may offer better rates owing to your good credit history. Meanwhile, you may get emergency financing due to business expansion because of your good credit scores.
Cons
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Debt startup
It seems student loans are the first dose of a financial burden you have to taste since you are a grow-up. Once you graduate, you have to start paying back the loan. Thus, you may need to find a job in a short time and sometimes have to accept a position not quite fit for your requirements. In low economic times, you may have to take lower wages.
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Obstacles in life
No one likes debt. When you have other ambitious goals to fulfill, the debt may become an obstacle to your plans. You are discussing a six-month trip with your friends after graduation, but you feel heartbroken as banks send a painful message reminding you of the first payment date.
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Penalties
There is something one may miss in life. Repayment is no exception! You should get ready to pay more for late payment, like added interests and fees, if you do not pay on time. You may even be ordered to use your wages to pay a debt in court in some cases.
Best Student Loans From Top Banks in Singapore
The table below compares the features of the loan packages offered by top banks in Singapore.
They comprise the most competitive offers by the leading financial institutions in the market.
| Education Loan Programs | Processing Fees | Interest Rates | Tenure (years) | Reviews |
| OCBC Frank Education Loan (local studies) | 2.5% | 4.5% | 1-8 | Max. loan amount: $150,000 or 10 times monthly income
Eligibility age: 18-65 Income requirements: $24,000 Early repayment fee: 1% of loan prepaid Late payment fee: $50 |
| OCBC Frank Education Loan (overseas studies) | 2.5% | 4.5% | 1-8 | Max. loan amount: $150,000 or 10 times monthly income
Eligibility age: 18-65 Income requirements: $24,000 Early repayment fee: 1% of loan prepaid Late payment fee: $50 |
| Maybank Education Loan (promotion rate offers) | 2% | 4.45% | 1-8 | Max. loan amount: $200,000 or 8 times monthly income
Eligibility age: 18 or above Promotion: Get S$100 eCapitaVouchers (minimum loan amount S$15,000 for at least three years) Early repayment fee: 1% of loan prepaid Late payment fee: 3% or min. $30 |
| Maybank Education Loan (for low-income applicants) | 1.5-2% | 4.5-4.78% | 1-8 | Max. loan amount: $200,000 or 8 times monthly income
Eligibility age: 18 or above Income requirements: $30,000 Early repayment fee: 1% of loan prepaid Late payment fee: 3% or min. $30 |
| OCBC Frank Education Loan (Graduated & interest services) | 2.5% | 4.5% | 1-8 | Max. loan amount: $150,000 or 10 times monthly income
Eligibility age: 21 Income requirements: $24,000 Early repayment fee: 1% of loan prepaid Late payment fee: $50 Loan interest is paid only for up to the first five years. |
| POSB Further Study Assist | 2% | 4.38% | 1-10 | Max. loan amount: $80,000 or 10 times monthly income
Eligibility age: 17 or above Income requirements: $24,000 No prepayment fee Late payment fee: $30 For local studies only |
University and Polytechnic-sponsored Student Loan Plans
Many public universities and polytechnics also sponsor student loan programs with major banks, e.g., DBS(Development Bank of Singapore), OCBC(Overseas Chinese Banking Corporation), and UOB(United Overseas Bank).
The education loans’ features are low interest, and up to 90% and 75% of tuition fees from universities and polytechnics, respectively, can be approved for applicants. The loan interest is an average of Singapore’s prime lending rates. Typically, students do not need to repay until graduation.
Students must be accepted and enrolled by institutions and do not belong to one or more of the following categories:
- Subsidized by Government/Statutory Board/any scholarships for intuition fees
- Use of CPF for payment of 100% tuition fees
- Full intuition fee subsidy from MENDAKI
- Self-funded courses
List of local institutions of sponsoring student loan programs
- National University of Singapore
- Nanyang Technological University of Singapore
- SIM University
- Singapore University of Technology and Design
- Singapore Management University
- Singapore Polytechnic
- Nanyang Polytechnic
- Ngee Ann Polytechnic
- Temasek Polytechnic
- Republic Polytechnic
- Singapore Institute of Technology
Choosing the Best Student Loan Plan
You should choose a loan plan based on your situations related to age, interest costs, income, plan processing fees, income, personal goals, career path, and priorities. A suitable loan package should meet your unique needs and preferences.
We will discuss the essentials in the following.
- Interest cost: Interest is the primary consideration for choosing a student loan. The more interest it requires to repay, the more expensive the loan becomes.
- Plan fees: You should review the expenses related to application, processing, and withdrawal before deciding to apply. Plan cost and fees may outweigh cost savings from a low-interest loan plan.
- Repayment structure: Some loan packages defer interest payment or principal and interest payments within a certain period. However, you should need to know interest cost is the highest for the plans. However, there is no doubt it offers many flexibilities for applicants to pay up their loans.
- Loan amount: The bigger the loan you borrow, the more you have to repay with interest.
- Individual circumstances: You may take your age, income, and goals into considerations. They may affect how you choose an education loan plan.
Suppose you are a mature student with more savings and earning capability. In that case, you are not likely to defer and extend the payment period to avoid overpaying.
You choose a short repayment period if you anticipate a career advancement after graduation. In the meantime, you can retire your loan to reduce interest costs.
Income may affect how you pay. If you don’t have much income, you should consider long, affordable, and flexible payment terms are suitable.
Change of career may be your impetus to go to school again. It is prudent to delay initial payback or extend the payment period. You have more time to adjust and catch up with a new career. Temporary debt relief is a wise choice.
You want to prioritize things. Travel and visit to your family or friends abroad may delay your repayment plan. You need more time to pay up a loan.
Conclusion
Banks’ loan programs or sponsored by universities and polytechnics have quite stringent criteria for applicants like income requirements. Applicants or guarantors may find it hard to meet the essential monthly criteria. Besides, some applicants have bad credit history and are likely to face rejections from banks.
However, beyond banks, financial institutions like moneylenders also provide an alternative in offering student loan services. The advantages are they are flexible in term loan terms, and they also handle clients’ requests quickly and personally.
365 Credit Solutions is a licensed money lender and regulated by the Singapore Government. Since it was established in 2010, 365 Credit Solutions personal loan has helped more people fulfill their dreams in low-interest loans and preferential terms.
