At what price an education?

At what price an education?

AFTER compiling some data on the cost of a university education in Singapore, a few things stand out.

First, it does seem like tuition fees for the most popular courses at local universities have been kept reasonably affordable for citizens.

They have increased through the years, but higher costs have largely matched the rise of incomes.

At the National University of Singapore (NUS), a degree from the biggest faculties of Arts and Social Sciences, Engineering and Science now costs around S$8,000 a year.

This works out to about a fifth of the annual income of a typical full-time employee in Singapore. The ratio has not changed in the last eight years.

However, the more prestigious faculties of medicine and law are more expensive.

Of note is how fast the cost of a law degree has increased from 24 per cent of median annual income in 2008 to 30 per cent in 2015.

Meanwhile, a medicine course is the most expensive, at around 60 per cent of median annual income. On the bright side, its cost relative to median income has not changed in the last eight years.

Start planning early

After the cost of a house and a car, the cost of a university education is likely to be the biggest expense a family will make before healthcare costs in the golden years.

And parents and parents-to-be should start saving early.

They will be likely paying for their children at a time when they are in their late 40s to early 50s, when they are most vulnerable to retrenchment due to an economic downturn.

There is help if they cannot afford it. Bursaries are available for low-income families.

Borrowing is also an option. But debt is not a decision to take lightly. The graduate still needs to find a job to pay it off.

Sometimes, it is better to go to a less expensive school to study a practical subject, than to go to a more expensive one to study for a degree which potential employers do not have an application for.

Where borrowing is concerned, two schemes can help.

The Central Provident Fund (CPF) Education Scheme allows children to borrow from the Ordinary Account (OA) savings of their parents at an interest cost of 2.5 per cent a year. Interest starts to accrue the moment CPF savings are deducted.

Meanwhile, the Ministry of Education (MOE) Tuition Fee Loan Scheme, operated by the three local banks, has an interest rate based on the average prime rates of the banks, which works out to 4.75 per cent currently.

However, the interest only kicks in after graduation. It thus makes sense to take this loan if you can quickly pay it off after graduation. Otherwise, the CPF version will cost you less interest over time. Meanwhile, working while studying can also make ends meet. There will be on-campus and off-campus jobs available.

Going overseas is a luxury

Glance at the costs of an overseas education and it rapidly becomes clear that it is a luxury good without the benefit of a scholarship or other forms of financial aid.

If they cannot afford it, a good compromise is a local education with an exchange experience tagged on. Parents should not sacrifice their retirement security to pay for a school beyond their means. And they should not sell their homes to fund their children's education.

Among the popular Western countries students go to, Australia is among the cheapest, especially in recent years as its currency depreciated with the commodity price crash. But one is still looking at around S$40,000 a year on the low side, which is about 100 per cent of median income.

The UK is looking cheaper with the depreciation of the pound, but we are still talking about S$50,000 a year on the low side and S$70,000 a year on the higher side.

The top private schools in the US such as the Ivy League colleges, Stanford and MIT can set you back by almost S$100,000 a year. Costs are still rising sharply every year.

However, Harvard, Princeton, Yale, MIT and Amherst offer need-blind admissions for international students. There, one's need for aid does not affect one's chances for admission. Once you get in, you can get financial aid according to your needs.

The challenge, of course, is to get in. That requires a combination of outstanding grades, standout success in other pursuits, and a striking admissions essay, such that the admissions officer sits up thinking: Yes, we really want this student; he or she can inspire the community to excellence, and in the years to come, make the world a better place to live in.

This article was first published on October 3, 2016.
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