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Following is a question by the Hon Mr Yeung-sum and a written reply by the Secretary for Education, Mr Michael Suen, in the Legislative Council today (April 23):
Question:
Regarding the Tertiary Student Finance Scheme – Publicly-funded Programmes ("TSFS") and the Financial Assistance Scheme for Post-secondary Students ("FASP") ("financial assistance schemes"), will the Government inform this Council:
(a) among the cases in which financial assistance in the form of a grant was provided under these financial assistance schemes in the current school year, of the respective number and percentage of those in which the grant is less than $20,000, as well as the average amount of loan approved in such cases;
(b) of the interest income of each financial assistance scheme in each of the past 10 years;
(c) of the reasons for some cases turning into bad debts; together with a breakdown, by such reasons, of the bad debt cases of each financial assistance scheme in the past 10 years;
and the respective numbers of defaulting cases in the past 10 years with over five, 10 and 15 instalments overdue under each financial assistance scheme;
(d) of the additional charges payable by borrowers for defaulting loans, together with the name, amount and method of calculation of each item; and the total amount of additional
charges payable in the defaulting loan cases in each financial assistance scheme in each of the past 10 years; and
(e) whether it will change the existing low-interest loans under TSFS to interest-free loans; and whether it will increase the direct subsidy for students who are only eligible to apply
for assistance under FASP (especially sub-degree students) or offer interest-free loans for them to meet their living expenses; if it will, of the implementation date; if not, the reasons for that?
Reply :
President,
(a) In the current academic year (up to 31 January 2008), under the Tertiary Student Finance Scheme – Publicly-funded Programmes ("TSFS") and the Financial Assistance Scheme for Post-secondary Students ("FASP"), the number of cases with a grant not exceeding $20,000, the percentage of these cases against the total number of cases and the average amount of loan paid for such cases is in Table 1.
(b) Loans under TSFS and FASP are subject to an interest of 2.5% per annum. The borrower shall repay the loan and interest in 20 quarterly instalments within 5 years upon completion of study. The total amount of outstanding principal under repayment and amount of interest received under the two schemes from 2002/03 to 2007/08 academic years(Note 2) are in Table 2.
(c) The Student Financial Assistance Agency (SFAA) may consider writing off student loans under the following circumstances:
(i) on compassionate grounds if the loan borrower has passed away;
(ii) where all efforts to contact the loan borrower and his indemnifier(s) have failed, and the loan proves irrecoverable; or
(iii) where write-off action is recommended by Department of Justice (DoJ).
From the 1998/99 to 2007/08 academic years, the number of write-off cases under TSFS and FASP due to the above reasons is provided in the Annex.
From the 2002/03 to 2007/08 academic years (Note 2), the number of default cases under TSFS and FASP with 5-9, 10-14 and 15 or more overdue quarterly instalments respectively is at Table 3.
(d) Statistically, SFAA classifies cases with two or more consecutive overdue quarterly instalments as default cases. This does not include cases where deferment of repayment (e.g. due to financial hardship, further studies or serious illness) has been approved. If loan borrowers of TSFS and FASP fail to settle their quarterly instalment by the due date, they will be required to settle the overdue instalment together with a 5% surcharge. SFAA is reviewing whether and how recovery costs and administrative costs arising from the recovery action should be charged pursuant to the undertaking signed by the loan borrowers.
From the 2002/03 to 2007/08 academic years (Note 2), the total amount of surcharge received each year under TSFS and FASP is in Table 4.
(e) The Audit Commission recommended in its report published in 1985 that loans under TSFS (formerly known as the Local Student Finance Scheme) should be interest-bearing in order to ensure more effective use of public resources. Subsequently an interest of 2.5% per annum was charged starting from the 1987/88 academic year.
Loans provided under TSFS and FASP are not subject to any interest during the study period. Hence, the effective interest rate over the entire loan period depends on the duration of the study period as well as the repayment period. Assuming a loan borrower pursues a 3-year programme, takes out a loan of the same amount each year and repays the loan over a period of 5 years, the effective interest is just 1.4%, which is reasonable. In the light of the above background and consideration concerning the level of interest charged, we have no intention to provide the loan on an interest-free basis.
We have recently published the "Report of Phase 2 Review of the Post-secondary Education Sector" and recommended therein further improvements to FASP, including the provision of means-tested, low-interest loans to eligible students to cover their living expenses. The recommendations will be implemented upon approval by the Finance Committee of the Legislative Council.
Note 1: Starting from the 2006/07 academic year, financial assistance under FASP has been provided in the form of grant.
Note 2: SFAA started to compile relevant statistics from the 2002/03 academic year. Statistics before that year are not available.
Note 3: The figures refer to the combined amount of the total outstanding principal and total interest received under TSFS and the Student Finance Assistance Scheme (SFAS). Breakdown of the figures under the two schemes is not available.
Note 4: The amount includes the surcharge received under TSFS and SFAS. Breakdown of surcharge received under the two schemes is not available.
Ends/Wednesday, April 23, 2008
Issued at HKT 21:57
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