Math Modelling Project
University loans
Objective
To find the most economically wise loan for a four years engineering university course in National University of Singapore.
Assumptions
- Four years Engineering course in National University of Singapore
- Starting work immediately after graduation
- Starting pay of $3000
- Interest rate remains constant
- No inflation
- Course fee: $7850 per annum
1) CPF Education Loan
Course: Engineering
Total Fee =$31,400Conditions
- Repayment will start one year after date of graduation or date of leaving the institution, whichever is earlier
- Interest starts accruing from the day of withdrawal
- Interest pegged to the prevailing CPF Ordinary Account interest rate which is currently 2.5% pa
- Repayment period: a maximum period of 12 years
- The minimum monthly instalment rate is $100. The instalment rate stated in the repayment letter will be $100 if this rate is expected to enable you to fully repay the loan within 6 years. Students are encouraged to fully repay the loan within 6 years to reduce the interest incurred for the loan
Calculations
Case 1: Withdraw fees for 4yrs at once
Course fee for 4yrs= 7850(4)=31400
Total Amount to pay: ar^n=31400(1.025)^n
2) NUS university loan
Course: Engineering
Tuition Fee per annum: 7850 (With MOE Tuition Grant Scheme, work in SG minimum for 3 years)
Total Fee =$31,400
Conditions
- 6 months after graduation or upon securing employment, whichever is earlier.
- Can pay all at once or installments (>100 monthly) up to 20 years
- Interest is on average prime rate of DBS OCBC and UOB
- Determined on the first day of each quarter (Have to assume the interest rate does not change over the course of 4 years)
- Interest free loan, repayment must be done within 5 years
Calculations
Starting pay: $3000
Yearly income: $36,000
Yearly repayment: 31,400/5 = $6280
Monthly repayment = 6280/12= $523.33
3) Bank Loan
Course: Engineering
Tuition Fee per annum: 7850 (With MOE Tuition Grant Scheme, work in SG minimum for 3 years)
Total Fee =$31,400
Conditions
- Interest rate starts right after studies
- Can pay all at once or installments
- Interest is on average prime rate of DBS OCBC and UOB ( currently 5%p.a.
- Up to 20% of the subsidized tuition fees payable by Singapore students and S$3,600 annual living allowance.
- Interest-free during course of study.
- Up to 20 years repayment period for interest bearing loan and up to 5 years for interest free loan with repayment commencing after course completion.
- Minimum monthly repayment of $100.
Calculations
Starting pay: $3000
Yearly income: $36,000
Yearly repayment: 31,400/5 = $6280
Monthly repayment = 6280/12= $523.33
limitations
- In reality, there is bound to have inflation.
- Might not be able to find job immediately