Congratulations on completing 12 or 13 years of schooling! For the JC students, you will be taking by far the most important exam in your whole life – A Level, which will decide where you will go in University. As for the Poly students, you should be either stressing out on your Final Year Project or having Internship attachment with your company. Do treat your internship seriously as it helps you to understand whether the job scope is suitable for you and thus have an impact on your future decision on jobs or further studies.
After completing schooling, we will reach the same juncture as everyone – further your studies in a University. This might come as a shock to you but university cost in Singapore is extremely high. On the safe estimate, we can assume our university fees to be around $30,000. These are approximations based on 3-year general courses, and exclude the more expensive courses like medicine.
The cost might have terrified you but we are here to help. In this article, we will discuss ways you can fund your tuition fees while schooling and it is possible!
This article is brought to you by Wealthdojo and Frugal Youth Invests.
This is the final installment of the two part series where Chengkok, the founder of Wealthdojo, and I explore how we can be more prepared for university financially. In the first article, we wrote about how we can be free from the burden of university debt. Do check them out if you have yet done so.
How to fund your studies?
Studying in a University may be months away after you have finished your major examinations, but we believe in planning your future ahead of time. This is especially so if you are looking to find part time employment before starting school. In the previous article, Chengkok shared about his work experience prior to studying in University and it has inspired me that it is possible to be free from the financial burden of University. We also pen down our thoughts on what kind of employment you should be looking for. Be sure to read it if you have yet done so!
We have identified a few methods to fund your university fees. I will share about how applying for bursaries, scholarships and taking up loans can help to reduce the financial burden of further studies while Chengkok will share his personal experience on how working prior to studying helped him to pay off his university fees.
University fees in Singapore are highly subsidised by the Government but many are still not able to afford them without additional financial help. Therefore, the Government has various financial assistance schemes to address this issue so that any Singaporean students should not be denied further studies due to their financial background.
The Higher Education Bursary and Higher Education Community Bursary are one such financial assistance schemes provided to Singaporean students from the low income groups to better afford university fees. The bursary value is dependent on Gross Monthly Household Income or Monthly Household Per Capita, each Singaporean citizen applicant can receive up to $6200 (excluding Medicine or Dentistry), which can offset up to 75% of tuition fees each year. You may refer to the table below for the bursary value based on your household’s income or per capita income.
The bursaries are also available for students studying Medicine or Dentistry in NUS and Medicine in NTU. To make studying Medicine or Dentistry more accessible to students from low income families, MOE has ensured that a student will pay no more than $5000 per annum in tuition fees after the enhanced government bursary and the additional aid from the university. In addition, students from NTU and NUS will pay the same remaining fees after receipt of the bursary as the fees for NUS Medicine/Dentistry and NTU Medicine are different.
Applying for a scholarship may be the most popular option among students but the competition is intense as many applications try to outshine one another in terms of their portfolio. We believe that applying for a bursary should be considered first before anything else as it only looks at applicant’s financial circumstance and not academic wise. Although this bursary does not fully offset the cost of university fees, it helps to reduce the financial burden of many.
In a bid to fully offset the cost of university fees, applicants can concurrently hold scholarships, bursaries, study awards which are specifically meant to cover the tuition fees or bursaries or grants meant to cover accommodation-related fees. However, applicants must seek approval from the University before holding any of the above financial assistance schemes.
Applying for a scholarship is another method in funding your university fees. It is competitive and only awarded to cream of the crop applicants with splendid academic results and non academic portfolio. There are two types of scholarship available – non bonded one offered by Universities and bonded one offered by companies. Scholarship usually offers the following to entice applicants to apply. It includes, but not limited to, covering tuition and compulsory fees incurred during the course of study, monthly maintenance allowance on books and computer. For bonded scholarship, the provider will offer an internship to their scholarship recipients.
There’s always a debate whether one should take a bonded scholarship or a non-bonded one. Having a bonded scholarship means that one will not need to stress about looking for a job after graduation, especially in this current state of economy. However, with that being said, one will be bonded for years. If one does not like the culture and decides to break the bond, he has to be prepared to pay a hefty penalty to the company.
Before deciding to take up a bonded scholarship with a certain company, it is recommended to look up about the company culture, maybe get an internship to experience how it is like working at the company and evaluate whether you will be alright to be bonded for the next few years in the same company.
Finally, I am going to share a useful comment on Reddit that I came across. I totally agree with him, I do not think that non bonded scholarship is seen as inferior to a bonded one. I feel that the flexibility that non bonded offers is underrated. In the end, it really depends on the preference of the individual.
There are two ways in funding your university fees through loans – Tuition Fee Loan (TFL) and CPF Education Scheme.
TFL is available to all Singapore Citizens and Singapore Permanent Residents studying in MOE subsidised degree programmes. TFL helps students to pay their tuition fees by covering up to 90% of the tuition fee payable by university students.
Key information to take note about TFL. The loan is interest free during the course of study and will only start to accrue three months after the borrower has graduated from university. The interest on TFL is based on the average prime rates (currently at 4.75%) of the three local banks – DBS, OCBC and UOB. Repayment can be made in one lump sum or by equal monthly instalments (minimum repayment is $100/month), commencing not later than 2 years after graduation or upon graduates securing employment, whichever is earlier. The loan must be fully repaid within 20 years.
As TFL does not fully cover the tuition fees, full-time Singapore Citizens or PR undergraduates with PCI of $2,700 and below can also apply for the Study Loan (SL). SL helps to cover the remaining 10% of the tuition fees not covered by TFL. The maximum limit of SL is 10%/20% of the subsidised fees payable by SC plus S$3,600 per annum for living allowance.
Repayment of the loan must commence not later than 6 months after graduation or upon securing employment, whichever is higher. The minimum repayment per month is $100 and the maximum repayment period is 20 years for applicants whose Gross Monthly Household Income Per Capita (PCI) is in the range of $951 to $2700. The interest on SL is based on the average prime rates (currently at 4.75%) of the three local banks – DBS, OCBC and UOB. For applicants whose PCI is less than $950, the loan is interest free and must be fully repaid in 5 years else interest will start accruing if repayment is made beyond 5 years.
CPF Education Scheme is the second method in funding your university fees through loans. The scheme allows you to use Ordinary Account savings to pay for individual’s, children’s or spouse’s subsidised tuition fees at Approved Educational Institutions.
The interest for the education loan will start to accrue from the time the OA savings are withdrawn until the education loan is fully paid. The loan interest is calculated on a monthly basis and is pegged to the OA interest rate (currently at 2.5%).
Applicant has to start repaying the principal amount withdrawn plus the accrued interest in cash to the CPF account, one year after graduation or termination of studies whichever is earlier. Repayment must be made in cash either in one lump sum or via monthly instalment over a maximum of 12 years
You may refer to this website for more information about the scheme.
Should you take up TFL or CPF Education Scheme?
Now that we know more about Tuition Fee Loan and CPF Education Scheme, the question now is which loan to take up to finance the university fees.
The difference between the two loans is when the accrued interest starts rolling in. MOE Tuition Fee Loan is interest free during the course of study but it has a higher interest rate of 4.75% (based on the average prime rates of three local banks). On the other hand, CPF Education Scheme has a lower interest rate pegged to the OA interest rate (currently at 2.5%). However, interest will start to accrue from the time the OA savings are withdrawn until the education loan is fully paid.
CPF has a nice illustration showing the difference. Assuming a borrower took 3 years to complete his studies, he would have incurred $840 worth of interest with CPF Education Scheme. On the other hand, if he had taken MOE Tuition Fee Loan, he has yet to incur any accrued interest.
Thus, when deciding between TFL and CPF Education Scheme, one should take into consideration how long one wants to repay the loan. One should take up the CPF Education Scheme, if one decides to stretch its loan repayment.
A borrower will only have to pay $19,800 which includes principal and accrued interest if he decides to take up TFL. However, if he had chosen CPF Education Scheme, he would have to pay a total of $20,300 that includes principal and accrued interest. This is even if the interest rate is lower at 2.5%.
Based on the illustration below, any repayment period longer than 4 years is the turning point in which one should CPF Education Scheme so that one can repay at a longer period and incur less interest than choosing TFL.
A borrower will only have to pay a total of $21,300, that includes principal and accrued interest, if he decides to fully repay CPF Education Scheme in 6 years. He has to pay an extra of $400 more if he has chosen TFL. This is because the interest rate for TFL is higher at 4.75%, compared to 2.5%.
Should you still take up loan if you have the funds?
Your parents might have saved for your tuition fees when you were younger. It should have matured or going to mature in a few years time. It is recommended to still take up a loan even if you have the funds. It is all about opportunity cost.
Every choice you make has its own opportunity cost. If one decides to pay up their school fees without taking up a loan, one will not be able to earn the extra interest from investing in safe instruments. Safe instruments include single premium endowment plan or cash management solutions.
However, it is not recommended to invest in equities while studying. What we want to achieve at the end of the day is to get back the full capital and the extra interest. Since TFL is interest free during the course of study, taking up TFL and invest the available funds in safe instruments will enable one to earn extra interest before paying a lump sum amount.
The ultimate question is how to self fund your university fees in 4 years. In the previous article, how to be free from the burden of university debt, we talked about the running cost and also the university fees. We are only going to focus on university fees for this article.
My journey of saving $22,000 before studying in a university started while I was serving the nation.
Back then when I was wearing green for 1 year and 9 months, I was saving close to 70% of my allowance as a man (not a sergeant or an officer). I have saved around $8000 by the time I ORD, this includes the incentives I get from passing IPPT.
After I ORD from National Service, I quickly found a job at a local bank in Singapore. I was quite fortunate to be able to have a 9 months contract with them. In the first month, I earned a basic pay of $1500 as I was under training. For the remaining 8 months, there was commission and I average around $3000 every month. Back then while working at the bank, I took home $20,400 after deducting for CPF employee contributions. My total expenses were $6300 or about 30% of my take home pay; I lived a comfortable lifestyle back then, spending an average $700 on food and transportation. This left me with $14,000 as savings in just 9 months of working before university even started.
Together with the savings while serving the nation, I managed to save around $22,000 before university. I only had to worry about my running cost by giving tuition. I hope my experience can help you realise that self funding for university is possible with some calculation and effort. There could be many other ways to self fund especially in this time now.
I want to inspire you that funding your university before it even happens is possible. It is possible if you work hard, be prudent and also plan for the future.
In Wealthdojo, I share about planning for the future with real life experience in our financial journey. We dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success. See you at my Telegram Channel if you wish to learn a tip a day!
University fees might be expensive for many ordinary Singaporeans but there are many schemes and methods available to finance them. No Singaporean students should be denied further studies due to their financial background.
I would like to thank Chengkok of Wealthdojo for sharing his experience with us. It has definitely inspired us that it is possible to afford our university fees, if we work hard, be prudent and plan for the future ahead.
Once again, thank you for your special appearance, this article will not be made possible without you!
Do check out Wealthdojo if you have not done so!
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