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Whether you're a student or a mid-career professional transitioning back to academia, the expense of pursuing further education can be a substantial amount every year. This financial commitment can get a little overwhelming at times. In Singapore, we are fortunate that the government does provide some assistance in the form of tuition fee loans, study loans and bursaries in collaboration with many educational institutions here.
If you're not a Singapore Citizen, there are also many study loans by banks which are available, and such loans offer a more extended repayment period to make managing your fees more feasible. Let's take a look at which education loan options are most suitable for you.
In Singapore, the government significantly subsidises the cost of education in various institutions, especially for Singaporean students admitted to publicly-funded Institutes of Higher Learning. Most students are responsible for paying the residual fees. For those requiring financial assistance with such fees, Government bursaries and institutional financial aid are accessible. Additionally, for further support, education loan options like Tuition Fee Loans and Study Loans are also available.
Both TFL and SL are financial assistance programs provided by the Singaporean government to support students from Singapore in funding their higher education. However, they differ in terms of coverage and eligibility. Below is an overview of each type of loan.
From course and institution to the loan amount, consider the total cost, including tuition fees, living expenses, books, and any other miscellaneous costs, and borrow only what you need. Keep in mind a loan is not free money; it comes with interest.
Understand the difference between flat vs. reducing balance rates. Flat rates may seem lower, but reducing balance rates often end up being cheaper as you pay interest on the reducing principal amount. In addition, look at the Effective Interest Rate (EIR) for a true comparison as it includes fees and the loan repayment schedule.
Some banks charge a processing fee, while others don't, so check in detail with your preferred bank and note the prepayment penalty if you intend to pay off the loan early, and also, the repayment period required. Longer repayment periods mean smaller monthly instalments but more interest in the long run.
While certain loans allow you a grace period where you don't have to make payments while you're studying, interest may still accrue. Thus, it is important to check with the bank if you can make partial repayments during your study to reduce the overall interest.
Some financial institutions offer promotional rates or subsidies for certain courses or institutions as they may have a collaboration with certain banks that offer special rates to its students. Moreover, you may apply for some government-subsidised loans or financial aid programs if you meet the eligibility criteria. These often come with lower interest rates and more favourable terms.
Look for reviews or ask friends or family about their experiences with the bank or lender and be sure of the lender's reputation and customer service style and speed, as you'll be dealing with them for the duration of your loan.
Some education loans come with insurance to cover unforeseen circumstances like illness or accidents. It helps to be aware of such coverage, understand the terms and decide if it's beneficial for you, as such insurance coverage is usually helpful if it’s part of an overseas education loan where there will be more uncertainty due to your distance away from home.
Consider the potential income you'll earn after completing your course and ensure your future income can comfortably cover your loan repayments as you do not want to end up struggling to pay off a loan which you cannot cope with. If you're unsure, seek advice from a financial advisor such as our MoneySmart’s team of financial experts who can provide personalised advice based on your financial situation and needs.