Thursday, August 26, 2010

SHOULD ADULT CHILDREN REPAY A LOAN FROM THEIR PARENTS?


It is our parental duty to provide a good education for our children. That can mean right up to post-graduate studies. Scholarships offered by the public and corporate sectors are very competitive, especially in Singapore. Not all parents can afford to support their children through university. To meet this need, both the CPF (Singapore) and the EPF (Malaysia) allow parents to withdraw funds for educational purposes.

Unlike the EPF education scheme which is a withdrawal scheme, the CPF education scheme is a loan scheme. CPF members are allowed to use up to 40 per cent of their accumulated Ordinary Account savings for their own or their children's full-time local diploma and first-degree courses. The total amount withdrawn for tuition fees plus accrued interest has to be repaid IN FULL WITH CASH. Repayment starts one year after date of graduation or date of leaving the institution, whichever is earlier.


According to a news report in the Straits Times today, about 5% or 7500 of borrowers have defaulted on the repayment of their educational loans and have failed to return money to CPF accounts for at least four consecutive months.

Even when the children have graduated and found a job, repaying their parents seems to be at the bottom of their list of priorities. Taking precedence are buying an apartment, paying for a car, starting a business, going for an overseas vacation, preparing for a wedding, ... the list goes on. And when their credit card debts start to snowball, their banker of last resort are...their parents, of course!

The end result? Their parents are left with depleted savings in their retirement funds.


Call it parental love or a reluctance to lose face, most parents are unwilling to take action against their children, or seek help from the Tribunal. They would rather work longer years or cut down on their living expenses to compensate for the shortfall in their retirement savings.

If parents are committed to shouldering their parental responsibilities, shouldn't adult children be just as committed to their filial duties? Or is filial piety on the wane?

It comes as no surprise that many middle-aged wage earners with limited retirement savings are facing this predicament. What would you do if your adult children did not repay a loan from you? Would you pursue it? Or let it go and consider it an early gift already allocated for in your will? Or silently hold it as a grudge against them and cut them out from your will?

4 comments:

foodbin said...

I think as parents it is our duty to provide a good education for our children-do not expect them to pay us back.

Anonymous said...

And that is your opinion and choice to do so. But, if the adult child had an agreement to repay a loan from a parent...that adult child does not have the right to just decide that they are not going to repay the loan. They should be responsible and live up to the agreement that was in place at the time they accepted the money!

Ken Hollars said...

Our adult son is declining to repay our college loan to him. (Well over $50K, which we need as part of our retirement). What legal recourse do we have, if any?

el-f said...

It depends on whether the loan repayment was a written one and signed by your son. Then you would have a case. Otherwise, there really isn't much you can do to make him repay the loan, especially if he is in no financial position to do so at the moment. In some countries like Singapore and India, there is a tribunal that hears such cases. It is mandatory for adult children to take care of their parents in their old age.