STUDENT LOANS IN SINGAPORE : AN EMPIRICAL EXPLORATION

Abstract

In recent years, there is a general trend throughout the world for Governments to reduce their subsidies to institutions of higher education. This trend is also observed in Singapore. Increasingly, a greater part of the cost of education is shifted to students and their families. Hence, to finance the increase in the cost tertiary education, many students have turned to student loans. The objective of this tudy is to find out some practical issues concerning student loans in Singapore. In the first part of the study, the author examined the existing loan schemes available in Singapore. With the use of cash flow calculations, the author attempted to find out which loan schemes off erred better terms to students, and under what conditions. It was noted that for a student to find the "best" loan scheme, not only must he consider the terms of the contract (e.g. interest rates, repayment period), his own repayment pattern (e.g. repayment through a lump sum or through monthly installments), would also have to be considered. In the second part of the study, a survey was conducted to find out the perceptions and borrowing behaviour of the students concerning the Tuition Fee Loans Scheme (TFLS). The results showed that whether a student borrowed or otherwise depended on the per capita income of his family, as well as on who the decision-maker was. Students who were less well-off financially and who made the borrowing decision themselves were more likely to borrow. The results also showed that the elasticity of the probability of borrowing, with respect to the per capita income of the student's family, was fairly inelastic.