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Why I took a full loan to pay off my school fees

Did you know that you could save money on paying school fees while using this method?

Benedict Lau

Benedict Lau

31 Oct 2020

Level 9·Student Ambassador 20/21 at Seedly

If you are currently in university or are planning to enroll in one soon, you would realize that there are literally so many ways that you can pay for your school fees. A few are listed below:

  • Credit cards

  • Giro

  • CPF Education Scheme

  • Loans (Tuition Fee Loan and Study Loan)

You would notice that loans are the last option on the list and that’s because no one really likes the idea of taking up a loan if they are able to pay for something upfront. However, this is exactly the focus for today- loans! Below, we will explore how taking up a loan can help us save while paying school fees.

(Source: Giphy)


  • First and foremost, this method is only suitable for those whose parents are willing and able to pay for your tertiary school fees

  • The paying parent must be at least 55 years old at the time of your expected graduation and must have satisfied the Full Retirement Sum (FRS) OR Basic Retirement Sum (BRS) plus own a property. Details here.

  • Take a 100% loan (90% TFL + 10% SL) to pay for your school fees

  • During the course of your study, your parents should set aside your school fees in their CPF to earn interest

  • Upon graduation and before interest from the loans kick in, pay off at once using the money accumulated in your parents CPF

  • Perks: save at least $3k for a 4-year FASS course in NUS or $2k for a 3-year business course in NTU

Use loans? Then how to pay off?

So, here’s the low down on it and how I personally approached my school fees situation. Instead of paying school fees every semester, I took up two loans; the Tuition Fee Loan (TFL) which covers 90% of my fees, and the Study Loan (SL) which pays for the remaining 10%. Together, these loans are used to pay for my school fees every semester.

The TFL is a government-funded education loan that is administered by two local banks, DBS and OCBC. The SL is generally awarded by the respective university you are enrolled in.

During my course of study, my parents would set aside a sum (ie. allocate that for school fees) in their CPF account to accrue interest. Hence, by the time I graduate and have to pay off my fees, they would have earned a pretty decent amount of interest to “offset” the school fees. Of course, the last step is to make sure that we pay in full upon graduation and before the interest from the loans kicks in!

This method that I use is in contrast with paying cash or using the CPF Education Scheme where fees are deducted every semester and there is no chance of earning interest on the amount of school fees payable.

(Source: Giphy)

But… is there a catch to all this?

I wouldn’t say there’s a catch. But first and foremost, you definitely need to have parents who would be willing to help pay off your school fees. More importantly, the account holder (ie. your mum or dad) with which you are parking your funds with would have to be at least 55 years old before the time of your graduation and must have fulfilled the FRS OR BRS plus have pledged their house. It would be ideal to meet the FRS though.

Both conditions need to be met for the withdrawal of excess CPF funds at age 55. Do note that the FRS changes yearly and you should check here for the latest one.

Lastly, the SL has a few additional eligibility criteria as compared to the TFL so that might prevent you from taking up a 100% loan. But even then, a 90% loan would generate quite a substantial amount of savings.

A real-life example:

Let’s assume that you will be starting a 4-year course in NUS. The yearly fees are $8,200 in the year you commence your studies and it increases by 1% every year (because inflation, right?). We will use the CPF OA rate for accumulation and assume the rate remains at 2.5%.

Based on the model below, you would have to pay a total of $33,295 in fees by the time you graduate. However, if you were to take up a 100% loan while accruing interest income in CPF, you would only need to set aside an initial sum of $30,130. That means $3,165 saved! That would definitely go some way towards helping your parents save on paying for your school fees.

(Source: Giphy)

No wonder Albert Einstein said that compound interest is the eighth wonder of the world! I hope this opinion has been helpful for you. Do share this around with friends or family whom you know are entering university next year! Also, do comment below if you have other ways of paying for your school fees which are able to give you some form of savings.

P.S While this opinion is written under the assumption that your parent will be paying in full for you, you can always help your parents out by paying a portion of the fees by giving them cash!

Note: The 100% loan does not take into account miscellaneous fees. Also, the use of PSEA has not been included in this exercise as one would generally use that to pay for summer/winter or semester-long exchange (in normal times :’)).


7 more comments

Benedict Lau

Benedict Lau

11 Nov 2020

Level 9·Student Ambassador 20/21 at Seedly

Hi @JT, yes its possible. However, I think there are a lot more criteria for graduate studies as oppose to undergrad studies. You may check out this link: http://www.nus.edu.sg/registrar/prospective-stu....

What are your thoughts?