While pursuing higher education in Singapore may be expensive, there are loads of financial avenues students can rely on to make tertiary education more affordable, regardless of financial status. Unlike scholarships and bursaries which require certain qualifications and backgrounds, student loans are generally easier to obtain.
Here are the different education loans available in Singapore and how to pick the best loan that suits your educational needs and repayment preferences.
What are study loans?
Study loans, offered by banks and certain institutions, are meant to offset heavy tuition fees that are not covered by governmental subsidies. They are generally of lower interest rates than personal loans and most are repayable only after graduation, allowing you to comfortably focus on your studies.
The 3 main types of education loans offered in Singapore are:
CPF Education Scheme
MOE Tuition Fee Loan
Banks/Financial institution (FI) loans
Here’s what’s typically required of student borrowers upon application:
Relevant personal and income documents as required by chosen bank
A guarantor (someone who promises to pay the loan in the case that you default)
Things to consider before applying
Applying for a student loan can be confusing, so here’s a comprehensive list of considerations to keep in mind as you’re searching for the perfect loan:
Are you eligible for the specific loan?
Consider your personal circumstances (age, citizenship, annual household income) as this determines whether you are eligible to apply as the main borrower as well as the maximum amount you can receive.
Pay close attention to the various interest rates behind each loan and remember: interest rates fluctuate with time, and the lowest now may not be the best option for you in the long run. It is also helpful to compare the effective interest rates across loans. There are a few websites that offer quick comparison charts, but if you find yourself still in doubt, speaking directly to the lender is always advised.
The true cost of your loan is known as the effective interest rate (EIR), which may be higher than the advertised rate because of the way interest is calculated.
Effective Interest Rates (EIR): a.k.a. what you will actually be paying
Here is how your effective interest rate will look, if you decide to take either a Monthly Rest Loan, or a Flat Rate/Interest-first loan:
Monthly rest loans: interest is calculated based on the amount owed each month
Allows for repayment while studying
EIR is the same as advertised rate
Flat rate/Interest-first loans: interest incurred for the loan period is calculated based on the original loan amount and divided across the loan tenure.
Repayment is only required after graduation.
EIR is higher than the advertised rate
Features of the loan
If you haven’t already guessed, when it comes to student loans, comparison is key. While there are tons of study loans in the market, sieving out the best one requires much research.
Hence, while reading up, take note of the unique components each loan has to offer (What is its maximum principal and tenure? What makes it better than other loans? What is the repayment schedule like and can you keep to it?) and narrow down your choices to what is most ideal for you and your projected financial situation after graduation.
Repayment schedule and penalties
Some loan tenures require immediate repayment upon graduation while others allow a few months’ buffer before commencing repayment. Hence, considering your expected financial capabilities post-graduation is important when choosing a student loan.
Penalties may be incurred as a result of delayed payments or prepayments:
Prepayments: when opting to pay off a loan before its tenure ends, a penalty of about 1% of the total amount owed or the prepayment amount may be incurred.
Don’t be startled if you discover yourself forking out extra during the application process — these miscellaneous fees are usually required for administrative purposes. In Singapore, most processing fees for study loans amount to about 2-2.5%. This percentage is typically deducted from the initial disbursement amount. Cancellation and disbursement fees may also be incurred depending on your loan situation.
Considering the total amount payable prior to contract signing is vital in ensuring a thorough understanding of the loan agreement and preventing any additional financial hiccups along the road.
Types of study loans in Singapore
Now that you’re all settled in, here’s a helpful summary of the most popular student loans available in Singapore and the relevant websites you can visit for more information:
CPF Education Scheme
The CPF Education Scheme is a loan scheme that allows your parents, relatives or siblings to help pay off your subsidised tuition fees via their Ordinary Account (OA) savings.
Only full-time subsidised diploma/degree courses
Sufficient OA savings and Available Withdrawal limit to cover scheme
Student must be Singaporean (Guarantor not required)
About 2.5%, depending on the OA interest rate which is adjusted quarterly.
Calculated monthly, accrues after the OA savings are withdrawn
For paying parents or siblings: 100% of tuition fees can be paid through this scheme
For paying relatives:
10% of tuition fees can be paid for a student studying at a university
50% of tuition fees can be paid for a student is studying at an art college
Commences one year after graduation or termination of studies, whichever is earlier
One lump sum
Monthly instalments over a maximum of 12 years (Instalment rate is based on the loan amount and repayment period)
Tip: Early repayment of this loan scheme is recommended to ensure that your parents or relatives have sufficient remaining balance for their future housing, retirement and medical expenses.
MOE Tuition Fee Loan
The MOE Tuition Fee Loan covers up to 90% of the subsidised tuition fees payable by Singaporean university students. Administered by DBS and OCBC banks, it is a popular option among students as interest accumulation is withheld until graduation, meaning one has a chance to build up their savings or partially repay the loan amount while studying, thereby granting them a more relaxed repayment situation.
Students who are studying full-time or part-time undergraduate or postgraduate programmes in autonomous universities
Interest-free for the course duration
Maximum loan repayment of up to 20 years for university students
Commences no longer than 2 years after graduation
Bank/financial institution loans
Loans offered by banks and FIs usually end up costing more than government schemes. For such loans, applicants below 21 years of age will also require a sponsor or guarantor during the application process. Usually, the guarantor should not be earning more than S$30,000 per annum to qualify.
Here is a quick summary of the different bank loans you can get.
OCBC study loans
OCBC provides different sets of student loans to meet varying educational needs. The OCBC FRANK Education Loan is applicable for local private and overseas students while the OCBC FRANK Tuition Fee Loan is available to students studying in local public universities, namely NTU, NUS or NIE. Additionally, the OCBC FRANK study loan exclusive to NUS students, provides a financial bolster to existing Tuition Fee Loans.
Here is a comparison of the two:
|OCBC FRANK Education Loan||OCBC FRANK Tuition Fee Loan|
|Type of institute||Local Private and Overseas universities||Local autonomous universities|
|Eligibility and Guarantor Details||For main applicants:
||Singaporean/Singaporean Permanent Resident:
|Interest Rate||4.5% per year||4.5% per year|
|Repayment Details||Loan tenure:
Modes of repayment:
DBS study loan
The DBS study loan provides local polytechnic and university students with supplementary funds throughout their tertiary education. Students normally sign up for this loan through their institutions. So, if you’re considering the DBS study loan, do look it up on your institution’s financial aid portal!
|Type of institute||Local universities|
|Eligibility||Undergraduates who have received financing of tuition fee payable by Singapore Citizens from Tuition Fee Loan, CPF Education Loan or others.|
|Interest Rate||About 4.38% per year (charged at an average prime rate of DBS, OCBC, and UOB after graduation)|
|Repayment details||Loan tenure:
POSB Further Study Assist Loan
The POSB Further Study Assist Loan is another financial assistance option catered to help students through their studies at an affordable cost.
|Type of institute||Local and local private institutions|
|Eligibility and Guarantor Details||For Borrower:
|Interest Rate||4.38% per year|
|Processing Fee||2.5% (deducted upfront upon first disbursement)|
|Repayment Details||Loan tenure: 1- 10 years|
Monthly student loans from other banks
Various banks such as Maybank, CIMB and RHB offer loan schemes for students seeking to pursue local and overseas education. Maybank’s is applicable to students pursuing part-time courses while CIMB’s requires students to be studying full-time. While the interest rates of these banks may be higher, the loans provided by them work on a monthly rest basis, meaning that your interest will reduce as you pay off the loan amount each month.
Study loans provided by your institutions
Local tertiary institutions also offer a slew of financial assistance schemes for needy students, from financial aid and bursaries, to student loans.
Before enrolling into your university, it is good practice to check out their financial aid portals to get an idea of all available financial options and eventually find one that is best suited to your preferences and needs.
Study loans: Dos and Don’ts
You’ll know by now that loans are not free cash — they must be repaid with interest. Hence, a forward-thinking mindset should be adopted when applying for a loan — consider your current academic needs, future repayment capabilities as well as your family’s needs and other financial commitments. Partial repayments over an extended time frame usually fair better than resorting to default a lump sum at once!
Now to wrap things up, when taking up a loan:
Research and compare the different types of loans available
Calculate the effective interest rates
Consider your current and future financial capabilities
Consider the repayment schedule
Be aware of the penalties and additional charges
Be proactive in loan repayment
Exercise financial responsibility and start building up an emergency fund now
Take up more loans than necessary — you will likely be in deep debt and feel overwhelmed
Disobey the loan terms and default — this racks up a poor credit rating which in turn costs you higher interest rates of future essentials like cars or housing.
With the above information, you can choose the student loan that best suits your needs, and enjoy your undergraduate years worry-free!