Student loans and financial literacy

My latest book read is The Rooster Bar by John Grisham. A compelling writer coupled with a unique story plot about student loans scam in the US; the book was devoured in a matter of days. I cannot help but feel shocked at the size of the student loans each protagonist chalked up in the novel. Each of them owed approximately US$200k, the 3 totaling a whooping more than half a million in student loans! The scam was simple yet outrageous. Private law universities were set up promising bright futures to young teens who could not make it to top universities, funded with student loans with exorbitant interest rates from banks owned by the same ultimate owner of the private law universities. The protagonists found out in a painful way that most graduates failed to secure jobs due to high unemployment rates; yet they are supposed to commence repayment upon graduation.

I tried to think back on my own university education years ago. In Singapore, university education is mostly subsidized for Singapore citizens. A degree in Accountancy requires 3 years to complete; each year cost at most $12k, which makes the total amount about $36k. Each working adult in Singapore is supposed to contribute a fraction of monthly pay to a mandatory savings scheme called “Central Provident Fund” (or CPF for short). For most Singaporeans, other than those who are lucky enough to garner sponsorship or scholarships, a loan is necessary to fund the fees. Besides going to a bank, there is an option to “borrow” from parents’ CPF savings. The interest rate is on the high side at 4%, however, back then, I decided upon this option, figuring that its better to pay interest to my own parent than to a third party.

With this background, you probably can understand my shock at reading about the student loans of US$200k each, which made it roughly 5 times of mine! In HSBC’s 2018 report “The Value of Education, students spend on average US$99,417 over the course of a degree. The numbers in the novel look like they are on the high side; then again, that was for private education. 85% of students have to work while studying to defray the costs. 62% of parents stopped or reduced their leisure activities to support their children’s university education. Many parents also wish they are more financially prepared for their child’s university education.

It is a worrying trend, as, if they are struggling to repay the education expenses, they may not have enough savings for their own retirement or emergency stash. In addition, upon graduation, the immediate worry and stress of loan repayment can be daunting, especially if they are not able to find jobs. This can be a vicious cycle; if the debts are not gotten rid of, their children will not be able to afford university education by the time they grow up.

Financial awareness; financial literacy; financial planning and eventually financial freedom become important to break the cycle; to remain debt free and even have ample savings for retirement, not to mention funding children’s education in the future! Hence, it is heartening to read that as part of the Singapore government efforts to boost financial literacy among Singaporeans and help them manage their money well, it was announced in Nov 2018 that a mandatory module will be introduced from 2019 onward in polytechnics and ITEs (

More can certainly be done, such as starting financial education at a younger age to instill the importance of financial knowledge or various workshops can be conducted targeting different segments of the population such as young adults concerning savings; parents regarding debt management or even retirees on retirement planning or setting up of trust funds etc.

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