Universities and polytechnic schools across Singapore are very expensive.
For parents, enrolling their kids to these schools is a hard decision to make, especially if their salaries are not very high. As a result, some kids are forced to enrol to other schools that are more affordable than their target schools.
Fortunately, for parents who are a part of the Central Provident Fund (CPF), they have a way to pay for their child’s education. Under the CPF Education Scheme, CPF contributors could users their CPF Ordinary Account money to pay for their child’s education.
But, there are certain aspects of the CPF Scheme that many Singaporeans like myself may not understand, and as a result, they could not utilize the scheme completely:
To help you get started, here is a brief guide on how to use the CPF Education Scheme:
Eligibility for Using the CPF Education Scheme
The CPF Board uses a simple criterion to identify if a CPF member can use their CPF Ordinary Account for the CPF Education Scheme:
• You must have enough money on your CPF Ordinary Account that can be used for the program
• The recipient of the scheme should be you, your child, or your spouse. Sometimes, you can pay for the tuition fee of your siblings, relatives or parents with your CPF funds. But, it is subject to review and approval.
• The course the recipient will study is a full-time course and they must be enrolled in one of the Approved Educational Institutions partnered with CPF.
• The recipient must also have a government tuition grant.
You and your spouse can use your CPF accounts to pay for the intended recipient of the scheme. Deductions will automatically be done to your account once the application is received. If one parent’s CPF account is not enough, the other parent’s CPF account will be used.
If all the available funds are used and there are still fees left to be paid, the student can take a loan from the MOE or apply for financial aid.
Applying for the CPF Education Scheme
Applying for the CPF Education Scheme varies depending on where your child or intended recipient will enrol in.
To apply for the scheme, the student can apply through the CPF website under the “My Requests” option. A notice will be sent to the CPF member online, and they have 14 days to approve the request to use their CPF money.
Using the CPF Education Scheme is beneficial for CPF members who will not use their Ordinary Account for other fees like servicing an existing HDB loan.
It is important to remember that the interest rate for CPF Ordinary Accounts is lower than any other education loan in the market.
Once they are earning, they will pay the interest directly to their loved one’s CPF account. But, repayments must be done regularly because it can have a major consequence to the owner’s CPF account.
A Limit to How Much CPF Can You Use?
The CPF Education Scheme is limited to how much a person can withdraw from the account.
Every CPF account has an “Available Withdrawal Limit”, which is your current Ordinary Account balance or 40% of your cumulative savings.
Cumulative OA Savings is computed by combining your current Ordinary balance plus the money you already withdrew for either education or investment. Any amount withdrawn for properties is not included.
If the CPF member is 55 years old and older, they will need to save up their Basic Retirement Sum before they can use the remaining amount for other expenses.
If you will personally use the CPF funds for your education, you can pay the full fee with the Available Withdrawal Limit in mind.
If your relative or sibling will use the CPF fund, there are more fund restrictions. If the recipient of the funds will enrol in at art college, they can pay up to 50% of the fees using CPF.
If they pursue their studies at a polytechnic or get a Technical degree, they can pay 25% of the fees with CPF. If the recipient will study at an approved university, they can only pay 10% of the fees with CPF.
Do I have to Repay?
In short, yes.
If you have opted to use your CPF to pay for university or polytechnic fees, repayment must be done by the recipient after a year of graduating or after they withdrew from school. CPF will send a notice to the recipient on how they can pay the CPF scheme 3 months before they are due to pay it off.
Repayments can be done earlier. Students can apply through the CPF website and pay online or other approved means.
Interests will be included in the repayment fees and it is based on the current OA interest rate. It will also be applied to start from the time the money is taken out of the account until the loan is fully paid. Interests will be computed regularly each month.
Repayments can be done through instalments or in one lump sum within 12 years. If you are uncertain on how much they will have to pay, CPF has a loan repayment and instalment calculator to help you out. Recipients can also increase their instalment amount each month at any time.
If the loan is paid as soon as possible, it will help the recipient save a lot on interests and reduce the overall costs of using the scheme. CPF members will also be able to use their money for other approved expenses.
If the student enters the military, study a different course or currently unemployed, they can apply for a deferment of repayments. They can also apply for waived loan repayments if they meet the right conditions. This, of course, will be subjected to approval.
In Other Words
With the help of CPF’s Education Scheme, you and your family can focus on the completion of the course without having to worry about funds until the course is complete. Of course, like any other loan, your recipient should pay regularly so you can maximize your CPF account when you need it.
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