Is it a good idea to use your CPF OA to fund your child’s tertiary education? Find out how much CPF funds can be used, what to look out for, and what alternatives there are.
Tuition fees in Singapore aren’t cheap by any means, especially if you’re talking about university and polytechnic school fees. And that’s precisely why the CPF Education Loan Scheme exists. It lets students dip into their parent’s CPF Ordinary Account (OA) to fund their education.
That being said, not every student is eligible for the CPF Education Loan Scheme. Read on to find out who’s eligible for a CPF Education Loan, how much CPF can be used for education, the list of important things you need to know, alternative study loan options, and more.
Table of Content
What is the CPF Education Loan Scheme?
The CPF Education Loan Scheme is a loan scheme that lets you use your CPF OA savings to fund up to 100% of your own, children’s, spouse’s or sibling’s subsidised tuition fees.
While it lets you borrow from your own CPF OA, take note that whatever amount you’ve withdrawn from your CPF OA has to be repaid along with the accrued interest in cash.
How much CPF can be used for education?
Your Available Withdrawal Limit is the lower one of the two:
- 40% of your accumulated OA savings comprising your current OA balance plus any OA savings that were previously withdrawn for education and investment purposes, excluding the amount used for housing; or
- Your remaining OA balance after setting aside amounts reserved for housing or other schemes (if any)
Who can apply for the CPF Education Loan Scheme?
The CPF Education Loan Scheme isn’t available to all students. In fact, the CPF Education Loan is reserved for students doing full-time subsidised diploma and degree courses at Approved Educational Institutions (AEIs) covered under the CPF Education Loan Scheme.
Tertiary schools eligible for the CPF Education Loan Scheme
- National University of Singapore (NUS)
- Nanyang Technological University (NTU)
- Singapore Management University (SMU)
- Singapore Institute of Technology (SIT)
- Singapore University of Technology and Design (SUTD)
- Singapore University of Social Sciences (SUSS)
- Nanyang Academy of Fine Arts (NAFA)
- LASALLE College of the Arts (LAS)
- Nanyang Polytechnic (NYP)
- Ngee Ann Polytechnic (NP)
- Republic Polytechnic (RP)
- Singapore Polytechnic (SP)
- Temasek Polytechnic (TP)
CPF Education Loan Scheme interest rate
The interest rate for the CPF Education Loan Scheme is pegged to the interest rate that funds in the CPF OA earn: 2.5% p.a.
You can use the CPF Education Loan Repayment Period Calculator to calculate howlong it would take for the loan to be repaid. To work out a feasible loan repayment plan, check out the Monthly Instalment Rate Calculator.
Important things to know about the CPF Education Loan Scheme
#1 The loan isn’t interest-free during the course of study
For the CPF Education Scheme Loan, the 2.5% interest starts to accrue at the point when CPF savings are deducted from the CPF OA.
#2 Loan repayment starts one year after graduation
The student is obliged to start repaying the principal loan amount plus the accrued interest in cash to your CPF OA one year after graduation or upon termination of studies, whichever is earlier.
Just in case you’re wondering, the maximum loan tenure is 12 years.
#3 Loan repayment cannot be suspended
In the name of ensuring your retirement needs are not compromised, bear in mind that the repayment of the loan and accrued interest cannot be suspended.
However, the student may apply to defer the repayment if certain conditions are met. If the student is facing financial hardship due to the COVID-19 situation, they can consider submitting a request to defer their repayment or work out a temporary repayment plan with a lower monthly instalment amount. Find out more here.
#4 The loan repayment can be waived only if conditions are met
You may apply to waive the repayment of the education loan if these two conditions are satisfied:
- You’re 55 and above; and
- You have set aside the Full Retirement Sum (FRS) in your Retirement Account either entirely in cash or a mix of cash (at least the Basic Retirement Sum) and property
#5 You may not be able to use your CPF OA for an education loan
Your Retirement Account will be created when you turn 55, pooling together monies in your CPF OA and CPF SA to meet the Full Retirement Sum (FRS) applicable to you. That’s the reason why it can’t be used for an education loan if you’re 55 at the time of application.
However, all’s not lost. Besides other education loan options, you can withdraw the remaining OA and SA savings in cash after setting aside the FRS (or up to S$5,000 if you’re unable to set aside the FRS). The withdrawn cash can be channelled towards your child’s education.
What to consider before applying for the CPF Education Loan Scheme
Ask yourself the following questions to determine whether or not the CPF Education Loan Scheme is the best option for you and your child:
- Are there other better loan options that you and your child are eligible for?
- How much CPF OA savings can you use under the CPF Education Loan Scheme?
- Do you have sufficient CPF OA funds to fully finance the course?
- If you were to tap on your CPF OA savings, would your housing needs and retirement planning be adversely affected?
- How does the estimated loan repayment period affect the total interest to be paid?
How to apply for the CPF Education Loan Scheme
The application can be done online using my cpf. Assuming that your CPF OA will be tapped on for the CPF Education Loan Scheme, both you and your child will be involved in the application process.
Step 1: Visit my cpf online
Step 2: Your child has to login with Singpass to submit the application via ‘My Requests’
Step 3: Check your email within two days: you should receive an email with a URL
Step 4: Login with your Singpass within 14 days from the application date to agree to the use of your CPF OA savings. The application would otherwise be rejected
To check on the loan application status, your child can visit my cpf online, login with their Singpass and click on ‘My Activities’.
Keep in mind that the loan application period for each Approved Educational Institution (AEI) varies. Refer to the application schedule to check the dates prior to applying for the loan — applications will not be accepted after the stipulated cut-off date.
What other education loan options are there?
#1 MOE Tuition Fee Loan
Full-time students in local polytechnics and autonomous universities can apply for the MOE Tuition Fee Loan to cover a fraction of their tuition fees — up to 75% for ITE Diploma or Polytechnic students and up to 90% for University students.
Singaporean students who are studying part-time subsidised undergraduate programmes in the autonomous universities can apply for the MOE Tuition Fee Loan, too.
The best feature of the MOE Tuition Fee Loan? The interest rate is 0% during the course of study! This means that if you were to repay the loan in entirety right after graduation, no interest will be incurred at all!
While cash repayment will commence one year after graduation, take note that interest will start to accrue upon graduation.
The maximum repayment period is 10 years for ITE Diploma and Polytechnic students and 20 years for University students.
If you’re considering either the MOE Tuition Fee Loan or CPF Education Loan Scheme, spend some time reading this case study that compares both.
#2 Study loans from commercial banks
Major banks in Singapore offer study loans with interest rate that ranges 4% p.a. - 6% p.a. and tenures that range between one to 10 years.
To qualify, students need to have an annual income of at least S$18,000 (the amount varies across banks) or a loan guarantor who makes at least S$30,000 annually.
Not all study loans are created equal: some require you to start repaying the month loan approval while others let you start repaying after graduation.
Remember to compare when choosing a study loan! Keep an eye out for the interest rate, processing fee, loan tenure, maximum loan amount, and early repayment fee.
It’s never too early to think about how the study loan will be repaid. Here, we’ve put together handy tips to help you clear education loans quickly. Good luck!
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