The Price of Education: Should You Avail of a Student Loan?

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The cost of living has been skyrocketing in recent months. So, even if you are not a spendthrift, you will still find it challenging to pay for all the things you need and maintain a decent way of life. For a student, that means tuition fees, books, school projects, internet connection services, public transport expenses, and other expenses. Not everyone is lucky to have the full financial support of their parents.

If you are a student and you are considering the option of applying for a loan, take the time to think about it thoroughly before making a decision. Remember that you will have to make this decision for yourself, not your parents and definitely, not your friends. Look for a licensed money lender that will allow you to borrow money.

When the deadline for school fees is fast approaching or you need to submit a project that will require expenses that your allowance cannot cover, it may seem like the only way out is a loan. Do not get pressured into making a decision you will regret later on. It would be wise to make sound financial decisions as early as now. Here is a short guide on how you can come up with a decision that you will not regret.

1. Learn more about each type of loan option

A loan comes with a set of obligations for the borrower. Usually, the obligation is to pay the amount of the loan plus interest and fees over an agreed-upon period of time.

You can also try to explore options provided by the Singaporean government. According to the Department of Statistics of Singapore, the total government expenditure on education in 2022 is at 13,247,000. The Singaporean government through the Ministry of Education offers loan options to assist students in the financial aspect of their education. These two options are the Tuition Fee Loan and the Student Loan.

These are the types of student loans you can avail of:

a. Central Provident Fund Board (CPF) Education Loan

This is the most commonly used student loan in Singapore. It allows the Borrower to use an ordinary account for subsidized tuition fees.  The CPF Education Loan is available only for full-time subsidized diploma/degree courses at Approved Educational Institutions (AEIs) like the National University of Singapore (NUS) and the Singapore University of Technology and Design (SUTD). If you choose this option, you will be limited to 40% of your savings in the CPF Ordinary Account to be used for the education scheme.

b. Ministry of Education (MOE) Tuition Fee Loan

This is offered to full-time students who attend polytechnic universities, full-time students in autonomous universities’ subsidized undergraduate and graduate programs, and part-time students in those institutions’ subsidized undergraduate programs.

c. MOE Study Loan

A student may apply for a Study Loan to cover additional costs if they have used the maximum amount of the Tuition Fee Loan and have a gross monthly per capita income of $2,700 or less.

You also have to know if you are eligible to apply for a loan. Tuition Fee Loans are available to Singaporean citizens studying in polytechnics and autonomous universities.

d. Loan from Bank or other financial institutions

There are banks that let you borrow money to finance your education. Visit their office to learn more about the features of their education loan products.

2. Evaluate your current financial situation

If you are thinking of applying for a Student Loan, chances are that you already have an existing Tuition Fee Loan and that you have already availed of the allowable maximum amount under this loan.  Maxing out your loan options is risky. It can lead to a rabbit hole of debt which you cannot easily get out of.

Before adding another liability to your pile of obligations, identify your sources of income and possible sources of income. Ideally, you should create streams of income to rely on instead of borrowing money.

3. Identify the Pros and the Cons

Obviously, the benefit of availing a student loan is that you will be able to address your financial needs. You will have money to pay for your tuition, books, food, and groceries. You can afford to stop being anxious about how to face every day with the current financial situation you have.

However, keep in mind that the feeling of peace and security that an infusion of funds can do for you is only temporary. What will make a lasting impact is knowing what you do with the funds and avoiding disadvantageous financial situations.

4. Map out how you can pay the loan

Before signing any loan documents, think ahead about how you will be able to pay the loan. Depending on how much the loan proceeds, you will have to plan how you can pay the installments and the frequency of payment required. For monthly loan installments, you will definitely need a regular source of income.

5. Explore other options you have

Perhaps, instead of applying for a loan, you can apply for a job instead.  Alternatively, you can get a job and use your income from it to pay for your loan.

There are plenty of full-time and part-time jobs available for university students. With the advent of remote work, you can even look for a job that will allow you to work online and on your own time. Search for jobs online through job posting websites and social media sites such as LinkedIn. If you are skilled in writing, you can look for online writing jobs.

If you want a regular source of income, you might want to look for a full-time position. Make a list of your skills and your available free time. You can ask your university if they hire teaching assistants. You can also ask your classmates or younger students if they want to hire you as a tutor. It all starts with knowing what you can offer to other people.

However, if your class schedule is jam-packed, it is best to explore part-time options. Some companies even offer flexible work schedules and some jobs are paid per output and not on the number of hours worked.

Conclusion

When it comes to student loans, it pays to know what will work best for you.

For an undergraduate student who still has years of studying ahead of him, a part-time job might be the best option to make sure the student loan will get paid. Keep in mind that once you take out a loan, your payment transactions will create a credit history and affect your credit score.

Simply put, the loan you take out today might affect a bank’s decision on whether or not to approve your home loan a few years from now. Do not take out a loan just so you can buy that concert ticket or go on a trip with friends.

Instead, prioritize long-term goals and build good financial habits for the future. Carefully examine how your small actions can affect your life in the future. By having this kind of mindset, you will be able to avoid frivolous and unnecessary spending and make difficult financial decisions wisely, even as a student.

Lastly, education is a crucial part of paving the way for a better future. While you might be experiencing financial hardships now, think of how your future self will thank you. It is ideal to not incur debt, but this is an opportunity to finance your education expenses and learn how to build good financial habits. Use it well.

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