Compared to the MOE Tuition Fee Loan, isn't the CPF Education Loan a better option as I will pay the interest to my parents' Ordinary Account so that they can benefit from it?
This is not the right way to think about it. The TFL is interest-free during the course of study. This means that if you repay the loan fully right after graduation, you will not incur any interest at all for the TFL. In other words, by not using your parent’s OA savings, government will be paying your parent an OA interest of up to 3.5% during your period of study.
On the other hand, if you borrow from your parent’s OA, the interest starts to accrue from the time the savings are withdrawn to pay the educational institutions. When you repay the accrued interest to your parents’ OA, you are simply restoring their OA to what government would have paid them anyway. There is no additional benefit to them.
Another reason why TFL is a better option is because the TFL repayment and interest can be suspended in periods of economic downturn. For instance, MOE has suspended the TFL repayment and interest from 1 June 2020 to 30 September 2021 to support households affected by Covid-19, and had done so in the past as well.
None of the above interest-free advantages on the TFL could be applied to the CPF Education Loan Scheme. This is because the interest paid by you, is what would have naturally accrued to your parents during the period of study and during the pandemic, and must be restored because CPF savings are essential to them in retirement.
