4 tips for university graduates to clear tuition fee loans quickly

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University tuition fees in Singapore aren’t exactly cheap, costing several thousands per year at least. 

Starting your young adult life under a debt of tens of thousands of dollars can be worrisome, and it’s understandable if all you want to do is to sweep the problem under the carpet and leave it to your older self to deal with the problem. 

The good news is, with the right strategies and mindset, clearing your tuition fee loan need not be something to dread. Here’s what you need to understand about tuition fee loans, and how you can clear them quickly. 

How much do university tuition fees cost in Singapore?

The actual cost of tuition depends on the course you’re taking, with specialised courses like law and medicine being among the most pricey. 

Here’s a quick sampling of tuition fees for popular degrees between NUS, NTU and SMU. Note that fees displayed indicate costs per annum, after Government subsidies.

  NUS NTU SMU
Arts and Social Science $8,200 $8,200 $11,450
Business $9,600 $9,400 $11,450
Law $12,650 NA $12,650
Medicine (except Nursing) $28,900 $34,700 NA

Sources: NUS, NTU and SMU

On average, a business degree in Singapore costs in the vicinity of $30,000, after subsidies. That’s a lot of money!

What are my options for funding university tuition fees in Singapore? 

There are a couple of ways to finance tuition fees at our local universities, each with their own unique features.

Tuition Fee Loan

Loan amount Repayment period Interest (based on prime rate average) Where to apply
Up to 90 per cent of subsidised tuition fees Up to 20 years, commencing two years after graduation.  5.08 per cent per annum NUS and NTU students: DBS or OCBC banksSMU students may apply for this loan directly from SMU

One of the more popular options is to apply for a Tuition Fee Loan.

You can get up to 90 per cent of your subsidised tuition fees funded this way. You’ll have a generous amount of time to pay back your loan – up to 20 years! (However, this might not be a good thing; we’ll explain why later).

As for the interest charges, they are based on the average of the prime lending rates of DBS, OCBC and UOB. At the time of writing, this works out to 5.08 per cent per annum.

You will be expected to start repaying this loan as soon as two years after graduation. If you defer starting your repayments to a date later than that, you’ll be charged an additional 1 per cent interest. 

Thankfully, repayments start at an easy-going $100 per month. 

CPF Education Scheme loan

Loan amount Repayment period Interest  Where to apply
Up to 100 per cent of subsidised tuition fees, subject to following: 40 per cent of accumulated savings in Ordinary Account or remaining Ordinary Account balance, whichever is lower. Up to 12 years, commencing one year after graduation.  Prevailing Ordinary Account interest rate. – up to 5 per cent  Online via CPF Board’s website

Another way to fund your tuition fees is with the help of a loved one.

Under the CPF Education Scheme, you can apply to request your parents or sibling to help pay for your tuition fees using their CPF savings.

The amount you can loan is subject to a cap, but depending on how much CPF is in your parents’ or siblings’ Ordinary Account (OA), you can potentially cover up to 100 per cent of your subsidised tuition fees.

You’ll have up to 12 years to repay the money in full, starting from one year after graduation.

The interest rate of the loan is pegged to the existing CPF OA interest, which is up to 5 per cent per annum at the time of writing. 

However, if your family member is 55 and above and has set aside the Full Retirement Sum, they may choose to waive off your tuition fee loan. Thank your lucky stars if that happens!

Bank education loans

Loan amount Repayment period Interest  Where to apply
$80,000 to $200,000, depending on annual income.  Between 1 to 8 years From 4.38 per cent per annum Bank of your choice

If the above two methods somehow do not work for you, a third source of funding would be an education loan from a bank. 

These loans are designed more for those seeking tertiary study overseas or at a private institution, and hence provide a high maximum loan amount. 

Like other personal loans, how much you can actually borrow is based on the usual factors like your annual income, credit history and more.

Interest rates and repayment tenures also vary according to the bank offering the loan. 

How can I clear off tuition fee loans quickly?  

No matter which method you choose to finance your tuition fees, it’s to your benefit to pay off your loan as quickly as you can.

The longer you take to clear your loan, the more you’ll pay in interest fees.

This is especially true for the Tuition Fee and CPF Education Scheme loans, which do not have a fixed repayment tenure. 

Here are four tips to help you pay off your tuition fees quickly.

1. Take advantage of the interest-free period

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If your loan allows you to defer the start of your loan payments until after graduation, you shouldn’t take that as a license to spend what meager salary you may earn as a fresh graduate.

Instead, think of it as a booster to help you clear your debt faster. 

To the best of your ability, set aside as much money as you can during the interest-free period before you have to start paying your loan.

When you start repaying, throw in the entire sum you have saved up, and then proceed with your monthly payments.

This should help take a chunk off your massive debt, as well as a load off your mind. This also reduces your principal owed, which generates savings in interest fees. 

2. Start your repayments on time

Although you may be given the choice to defer the start of your repayment, you should not do so if you can help it. 

That’s because some loans slap on extra interest charges for deferring your loan repayment start date, which will snowball into something of a monster by the end. 

Be vigilant; even an extra 1 per cent per annum will raise your loan’s effective interest rate to eye-popping levels, due to the effect of compounding.

Best to start your repayments on time so as to avoid paying more later on. 

3. Increase your repayments as your income rises

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With minimum payments at $100 per month and up to 20 years tenure, tuition fee loans are structured to be easy for fresh graduates.

However, after a few years of gainful employment, you should relook how much you put towards your student debt repayments.

Whenever you get a pay rise, make it a habit to allocate a portion of the increase towards your debt repayment. Same with bonuses and any secondary income you manage to generate. 

By increasing your debt repayment as your income rises, you will pay off your tuition fee loan quicker, saving interest fees in the process. 

4. Set a definite end-date for your loan

Another way to ensure you pay off your tuition fee debt quickly is to set a deadline by which to clear the loan. 

Barring any extreme circumstances (such as Covid-19, to quote a painfully salient example), this deadline should be non-negotiable. 

Set yourself regular reminders of this deadline and mark out milestones achieved along the way. Or, make a game of it; allow yourself a little reward or treat for every $1,000 paid off.

This can run up to a coveted ‘Grand Prize’ at the end, such as a feast at a favourite restaurant or a short getaway to your favourite city. 

Whatever rewards you plan for yourself, the goal is to make sure you clear your tuition fees as quickly as you can—which, in itself, is the best reward. 

This article was first published in SingSaver.com.sg.