Student loans: No defaults, say banks

THEY may owe money, but they'll pay it back.

Banks offering student loans to undergraduates at Singapore's universities say they have yet to encounter defaulters. Some even repay their loans early.

That is a far cry from students in the United States.

In November, the USA Today newspaper cited a credit analysis report which stated that unpaid student loans had put two out of three million people in their 20s surveyed in bad debt.

Such loans, along with credit card debt, had even caused up to 1.5 million of those surveyed to stop repayments altogether, forcing lenders to sell these debts to a collection agency.

The worst cases have had their cars repossessed or sought bankruptcy protection.

Singapore students are another breed altogether.

Credit Counselling Singapore's assistant director Tan Huey Min said 20somethings do seek help after overspending on credit cards, but not for student loans.

They are less likely to default on student loans, she said, 'probably because they don't want to get their guarantor into trouble'.

Another reason might be that 'the monthly payments for student loans are not as high as credit card bills'.

Three banks here - DBS, OCBC and UOB - which disburse student loans to Nanyang Technological University, National University of Singapore and Singapore Management University students, said they had never encountered students defaulting on repayments.

NTU accountancy undergraduate Law Hui Min does not plan to be the first.

The final-year student, who graduates in July with almost $28,000 in study loans accumulated over her four years of study, already plans to set aside $500 each month for repayments.

'It is a big loan, but I'm not worried,' said Miss Law, 22, adding that she already has an upcoming position in personal tax with accounting firm Ernst & Young which pays about $2,200 a month.

She gives tuition and works part-time to minimise her loan amounts. 'The longer I take to pay off the loan, the heavier my burden will be and I want to pay it off fast so that I can start making plans for my future.'

Another 10 recent graduates expressed similar views to The Straits Times, and are paying instalments of between $400 and $1,200 to do so - even though the banks' minimum monthly repayment is $100.

Some have even paid off their entire loan within two years of graduation, shaving at least two to three years off their original five-year term.

Like Miss Law, NUS business administration graduate Li Ee Yan left school with almost $24,000 of student loans to her name two years ago.

Now, she is just $1,000 shy of clearing her debt fully.

The 25-year-old made repayments of $1,200 each month, or a third of her $3,500 wage.

With the end in sight, she is relieved.

'I'm proud of being able to fund myself through university,' she said. 'I'm so glad it's almost over.'