CPF SAVINGS FOR TERTIARY EDUCATION

CPF SAVINGS FOR TERTIARY EDUCATION

8.

Mdm Ho Geok Choo asked the Minister for Manpower (a) what measures are in place to help parents who utilised their CPF savings to pay for their children's tertiary education and end up being short of retirement funds when their children default on repayments; (b) how punitive are the measures against children who fail to repay the loan amount to their parents' CPF accounts; and (c) how does the Ministry help CPF members to recover their money.

Mr Gan Kim Yong: To reduce the impact of education loans on a member's retirement savings, withdrawals are firstly capped within 40% of a member's accumulated Ordinary Account savings(1). Usage is also limited to only full-time Government-subsidised local undergraduate and diploma courses at approved educational institutions. This is to make sure that CPF monies are used to pay for affordable and good quality courses.

Those who have used their own or their parents' CPF to fund their education must start repaying the loans one year upon graduation. The principal amount withdrawn is to be repaid with interest to preserve the lenders' retirement adequacy. Repayment can be made via monthly instalments for up to 12 years. Those who do not pay for four consecutive months will be deemed as defaulters. After issuing reminders and warnings to defaulters, the CPF Board will commence legal action against recalcitrant borrowers. In extreme cases, the CPF Board can issue a Writ of Summons to bring the defaulter before the Magistrate Court for judgement, which could lead to seizure and sale of the defaulter's property to repay the loan. Bankruptcy proceedings may also be initiated against the defaulter.

As at end September 2010, about 5% out of 153,000 students who have tapped on their parents' CPF monies for education have defaulted(2). Although the proportion of loans in default is small, we are reviewing the use of additional measures to tackle non-repayment of education loans.

[1] The 40% cap includes amounts previously withdrawn for education and investments.

[2] Loans extended after 2006 are not included as most of these are not yet in the repayment phase.

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