5 Per Cent Of Graduates Defaulted On CPF Loans
Thursday, August 26, 2010
Just as the usual daily routine of flipping the Today newspaper, i have stumbled upon this hot new on graduates defaulting on CPF Loans. Are you one of this 5% who defaulted or the 95% who paid up? For me, i am the the 95% who has promptly paid up ever since i started on my first job.
My only suggestion to this scheme is that we should be using our CPF to repay back, instead of using cash, as this will help the fresh graduates to have more cash flow upon stepping into the working society. In this way, both parties, the aged and the young will benefit from it. And of course if this scheme is implemented, it should be made mandatory too.
Under-mentioned article is extracted from Today dated 26th August 2010
After leaving university, a graduate owed $4,700 that he used from his mother's Central Provident Fund (CPF) account before he finally got in touch with the CPF Board to start monthly repayments of $200. He then had to defer payment, citing personal reasons, before he eventually repaid the loan in one lump sum.
The graduate is one example out of an average of 450 local graduates per year who fail to repay these loans for four consecutive months since the CPF Education Scheme started in 1989.
Responding to media queries, the CPF Board disclosed yesterday - based on data till 2006 - that out of 153,000 graduates who tapped their parents' CPF monies to pay for tertiary education here, 5 per cent have defaulted on their loans.
The fact that not all children repay these CPF monies was cited by Education Minister Ng Eng Hen at a dialogue session on Sunday when asked if CPF could be used to fund overseas education. His worry was that some parents might not have enough money for retirement if this were allowed.
Those enrolled in local tertiary institutions can use up to 40 per cent of their parents' CPF Ordinary accounts to fund their education.
The scheme has flexible instalment plans - ranging from one to 12 years with a minimum monthly repayment of $100, starting one year after they graduate.
If graduates are unable to start repayment due to full-time studies, National Service or unemployment, they can opt for temporary deferment.
Usually, what the CPF Board can do to "protect the interest and financial security of older CPF members" is to send their children reminder letters, "encouraging" them to be prompt in repayment.
Some parents, though, are willing to write off their children's "debt".
This is allowed for parents who are 55 years and above and who have enough for the Minimum Sum and the prevailing Medisave Required Amount in their CPF accounts.
For instance, engineer Tan Teow Seng, 55, whose daughter recently graduated, waived repayments as she is making monthly cash contributions to the household.
His wife, Mdm Julie Kee, told MediaCorp it was the couple's "duty" to see her through university. They will do the same for their younger daughter.
Still, Mrs Josephine Teo, who chairs the Government Parliamentary Committee for Education, felt that more can be done to tackle the issue of defaulters, such as using the child's CPF monies to repay his parents' CPF savings.
"I wouldn't rule out this option for chronic defaulters. The graduate still has time to build up his career and CPF savings. Priority should be given to aged parents," said Mrs Teo, who described the number of defaulters here as "sizeable".
But she also recognised that some graduates may treat this as a way to increase their discretionary spending.
