Things Families Must Discuss Before Taking Out Student Loans

Higher education opens doors to opportunity for many young people. But it comes with a hefty price tag. In many cases, folks resort to student loans to help bridge the gap. These loans, however helpful they are, significantly impact your finances. This is especially true in a place like Singapore where the cost of living is high and the rising cost of education is real.

Taking out a student loan is a major financial decision. Before you decide to take one, you must talk it over with your family to make sure you’re all on the same page as it will likely affect all of you.

Doing the Math: Cost and Borrowing Amount

As a family, the first thing you have to do is calculate the total costs. On top of the tuition fees, you should factor in living expenses, such as rent, groceries, transport, and textbooks. You also need to consider unexpected costs.

You need to do your homework. Research different universities and programs that may offer lower tuition fees or scholarships that can significantly reduce the loan burden.

Once you have a realistic picture of the total cost, talk to your family about how much you can afford to borrow. Consider your future earning potential in your chosen field, and don’t borrow more than you think you can realistically repay in the long run.

Loan Options and Repayment Terms: Understanding the Fine Print

Singapore has two primary student loan types: government and private. Both have their own pros and cons.

Government Student Loans

Borrowing from the government to support your studies comes with certain advantages like the following:

Lower interest rates: Typically lower interest rates compared to private loans.
Flexible repayment options: May offer options like income-driven repayment plans or deferred repayment during studies.
Eligibility for government grants: May qualify for additional government grants or subsidies based on academic merit and household income.

However, it does come with its drawbacks, such as:

Eligibility criteria: May have stricter eligibility requirements, such as the course of study or citizenship status.
Loan limits: May have lower loan limits compared to private loans.

Private Student Loans

On the other hand, borrowing money for higher education from a private licensed money lender will give you the following advantages:

Wider eligibility: May be easier to qualify for, with fewer restrictions on course of study or citizenship, offering more flexibility for students pursuing niche fields.
Higher loan limits: May offer larger loan amounts to cover total education costs, potentially covering additional expenses like study materials or travel for international programs.
Faster application process: Private loan applications can sometimes be processed quicker than government loans.
Potential for lower interest rates: While generally higher than government loans, some private lenders may offer competitive interest rates based on your creditworthiness or chosen course of study (e.g., high-demand fields).

Just like a government loan, private student loans also come with certain disadvantages, such as:

Higher interest rates: Typically carry higher interest rates than government loans.
Less flexible repayment options: Repayment terms may be less flexible, with fixed monthly payments starting sooner.
No additional government benefits: May not qualify for additional government grants or subsidies.

Exploring Financial Aid: Scholarships and Grants

Another thing you and your family can consider before taking out a student loan is alternative funding options. The Singaporean government offers several grants to deserving students and families in need of financial assistance. Many universities also offer various scholarship programs based on academic performance and household income. Find out if your university or college of choice offers these types of student support to ease your financial burden.

Keep in mind that student loan repayments do not stop when you get your diploma and degree. Doing your due diligence now will help make things easier for you in the long run. Student loan repayments might hinder you from achieving some of your life goals post-university life so it pays to do your research and explore other options first before deciding.

Responsible Borrowing: Budgeting and Building Good Habits

Lastly, as a family, you must come together to talk about the value of responsible borrowing. Taking out a loan is one of the major adult decisions you will ever make in life. You need to understand that while it offers some relief, you are left with the big responsibility of managing the loan.

Aside from performing due diligence, start by drafting a realistic working budget while you’re in university. Look for ways to boost your finances without compromising your academics. Doing this will help prevent you from borrowing more money. If you’re fortunate enough to be granted a scholarship, consider getting a part-time job that you can easily perform. It is possible to juggle academics and work as countless others have done before. You just need to manage your time well.

On top of additional income sources, this is a good time to tear down bad financial habits and build good ones. Swapping out the bad with the good will help set you up for financial flexibility and freedom in life.

The Monetary Authority of Singapore (MAS) offers resources like the MoneySense website to help you understand personal finance and make informed decisions.

Wrapping It Up

The cost of higher education may be high but student loans make it possible for many folks to afford it. However, as helpful as they are, these loans also bring financial burdens past your time in the university. They can be a big hindrance to your plans if you don’t plan well for them.

For this reason, open communication with your family about these matters is important. Discussing this matter openly helps you make wiser decisions as a family to help you achieve your dreams without the excess baggage loans tend to carry.

Things Families Must Discuss Before Taking Out Student Loans

Real Name
Nick Name
Profession

Things Families Personal Life

Date of Birth
Age
Sun Sign
Birth Place
Religion
Caste/Ethnicity
Nationality
Hometown
School
College
Education
Debut