Here's What You should know About The Newly-Announced Suspension Of Education loan Repayments
As a follow-on to the Resilience Budget, MOE has announced a one-year suspension of loan repayments and interest for government education loan schemes. This is applicable from 1 June 2021 to 31 May 2021, for all autonomous university and polytechnic graduates.
For non-MOE student loans, MAS has announced that borrowers can choose to defer repayment up to 31 Dec 2021. This is applicable to full-time and part-time programmes at local and foreign private tertiary institutions.
Both kinds of loan deferments have varying conditions that students need to know about. We will explain the facts below.
What Type of Loans Are Eligible?
Those studying in polytechnics and autonomous universities can use for a government loan, namely Tuition Fee Loans, Study Loans and Overseas Student Programme Loans.
Most banks might have sent out a notification regarding the suspension. But if you are unclear about which bank administers the loan:
- SMU students should approach their respective institution
- NTU/NUS students should approach OCBC or DBS
- All other students can approach DBS
For non-government loans, various banks offer education loans at different interest rates. Most banks offer two repayment methods.
The standard would be to pay monthly instalments and interest upon obtaining a loan; the graduated pays only interest while studying, while upon graduation, you pay the principal and interest. Lastly, the graduated plus pays only interest while studying and something year after graduation, only from the third year onwards you have to pay the main and interest.
Other students may have chosen to finance their education with the CPF Education Scheme, in which you make use of your own or your parents' CPF to cover tuition fees. With this scheme, there is no suspension of repayments.
Eligibility Criteria For Loan Repayment Suspension
For government loans, you needn't apply for this loan deferment. All graduates with outstanding loans, regardless of nationality, receive a computerized suspension.
This applies to graduates who've already started on their own loan instalments, and students graduating in this suspension period. Students who have withdrawn using their courses and have outstanding loans are also eligible.
If you intend to continue repaying your loans, you can keep to do this by contacting your bank.
For non-government loans, it really works on an opt-in basis. However, for those who have missed more than 3 months of instalment payments prior to this application, you won't be eligible.
Will Interest Accrue During This Suspension Period?
For the government loans, no standard or penalty interest will apply in your outstanding loan.
But for non-government loans, interest will continue to accrue around the deferred principal amount during this period. This means that there will be no additional interest charged on the interest incurred during the deferment period.
One should take note that deferred repayments for non-government loans result in a higher total interest payment at the end.
After this deferment period, the loan tenure may be extended based on the number of months you've deferred. Thus, your monthly instalment may also be revised based on the interest accrued during this deferment, and the outstanding balance within the remaining loan tenure.
You may choose to opt-out from the scheme anytime without additional fees before 31 December 2021. By deferring your loan under built, it will not be adversely recorded through the bank. It will also not affect your credit agency standing.
Making Loan Payments Throughout the Suspension Period
During this deferment period, all GIROs will be suspended for government loans. If you'd like to make repayments for DBS, you can do so via internet banking, cash, cheque, wire transfer. For OCBC, available payment modes are cash, cheque, MEPS and SWIFT. The OCBC repayment form for study loan is here now.
Applying For that Deferment of Student Loans
You may apply together with your respective bank to use. This is a non-exhaustive listing of banks where you can visit CIMB Monthly Rest Education Loan, Maybank Education Loan, POSB Further Study Assist Loan, or OCBC Frank Education Loan.