As parents who want to provide the best for our children, saving for their tertiary education is one of the top priorities when it comes to financial planning in Singapore.
There are many ways we can save for our children’s education fund. Each method has their own set of risks and rewards. Today, we shall be talking about using the CPF Education Loan Scheme for our children’s education fund. This CPF scheme can also be used to fund our own education as well as our spouses’.
CPF (Central Provident Fund) was originally meant to be a source of retirement funding for Singaporeans but it can now be used for property purchases and tertiary education funding so that our hard-earned CPF savings can be used to improve other aspects of our lives in Singapore.
Therefore, if we have not accumulated enough cash to finance our children’s tertiary education, we can also use our CPF Ordinary Account (OA) savings to do so.
What Is The CPF Education Loan Scheme?
CPF Education Loan Scheme is a financing scheme which allows CPF members to use their CPF OA savings (subjected to the Available Withdrawal Limit) to finance the tertiary education for themselves, their spouses or their children.
There may also be situations in which we want to help fund our siblings or relatives. The CPF Board will consider such cases on a case-by-case basis.
To reduce the opportunity cost, repayment of accrued interest is included in the repayment of the withdrawal amount. The interest, which is calculated on a monthly basis, will start to accrue from the time the CPF OA savings are withdrawn and is compounded on a yearly basis, pegged at the prevailing interest rate for OA.
To put this simply, this is a loan we are taking from our CPF OA savings to be used for local tertiary education.
The Available Withdrawal Limit is defined as the lower of:
- 40% of our accumulated OA savings (which is the combined amount of our existing OA savings and any previous amount which were withdrawn for education and investment, excluding the amount used for housing), OR
- our remaining OA balance after setting aside any amounts reserved for housing or other schemes (if any).
It is important for us to note that for those of us who are 55 and above, we need to set aside the Full Retirement Sum (FRS) or Basic Retirement Sum (BRS) in our Retirement Account before we can use the remaining OA savings, up to the Available Withdrawal Limit.
Approved Education Institutions & Courses
This scheme can only be used to fund subsidised courses from the following institutions:
- Nanyang Technological University (NTU)*,
- National University of Singapore (NUS),
- 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),
- Institute of Technical Education (for students pursuing a Technical Engineer Diploma (TED) or a Technical Diploma in Culinary Arts)*.
*Any approved degree/ diploma programmes offered by these institutions in partnership with overseas universities are also included under the CPF Education Loan Scheme.
Paying Using The CPF Education Loan Scheme
We can use the CPF Education Loan Scheme to pay 100% of the tuition fees for ourselves, our spouses, children and siblings. However, if we are paying for our relatives’ tuition fees, the percentage of tuition fees that can be paid using our OA savings will be as follow:
- 10% if our relative(s) is studying at a university;
- 25% if our relative(s) is studying at a polytechnic or pursuing a Technical Engineer Diploma (TED) or a Technical Diploma in Culinary Arts at Institute of Technical Education (ITE); or
- 50% if our relative(s) is studying at an art college.
To pay the remaining tuition fees, our relative(s) can consider the MOE Tuition Fee Loan Scheme, subject to eligibility.
Students can apply to use the CPF OA savings from more than one person to pay for their tuition fees. Therefore, if the first person’s CPF OA savings is not enough to pay for 100% of the tuition fees, the second person’s CPF OA savings will be used.
If there is still a shortfall after all available CPF OA monies have been deducted, the student will need to make up the shortfall in cash, take a loan under the MOE Tuition Fee Loan Scheme, or seek out financial aid.
The repayment will start one year after graduation or termination of studies, whichever is earlier. The student will hear from the CPF Board about the loan repayment details around three months before it commences. Should the student wish to repay earlier, he/she is welcome to contact the CPF Board to make the necessary arrangement.
The repayment have to be made either in one lump sum or via monthly installments over a maximum of 12 years via GIRO or via e-Cashier (payment mode: eNETS/PayNow QR). The amount of monthly installment will be computed based on the loan amount and repayment period. The student cannot use his/her own CPF savings for the repayments.
It is always encouraged to repay the full loan as soon as possible to save on the interest payable and to allow the CPF member(s) to use the repayments for his/her housing and retirement needs.
The CPF Education Loan Scheme is still a great option when compared with the various education loans offered by financial institutions. With proper financial planning, we hope that you are better prepared for your children’s education funding.