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LCQ 19: Defaulted loan repayment of student
financial assistance


    Following is a question by the Hon Cheung Man-kwong and a written reply by the Secretary for Education and Manpower, Professor Arthur K C Li, in the Legislative Council today (May 18):


Will the Government inform this Council of the following information over the past five years:

(a) the average administrative cost incurred by the Student Financial Assistance Agency for recovering a defaulted loan repayment from a student;

(b) whether the Agency has forfeited recovery action in any default cases; if it has, of the reasons for that, the number of such cases and the total amount defaulted each year; if not, how it dealt with bad debt cases, and the total expenditure involved;

(c) whether there had been cases in which the administrative cost for recovering a loan exceeded the amount defaulted; if so, how the authorities dealt with such cases, the details of such cases and the amounts involved; and  

(d) the respective numbers of cases of default in repayment for one, two and three instalments and the amounts involved, and whether there is any dedicated Government department and extra manpower to follow up these cases; if there is, the details of the manpower involved; if not, whether the authorities have assessed if the handling of such default cases by the existing staff has increased their work pressure, if they have, of the assessment results?


Madam President,

(a) Under the various student financial assistance schemes administered by the Student Financial Assistance Agency (SFAA), loan borrowers are required to repay their loans in quarterly instalments upon graduation or termination of studies.  Failure to repay two or more consecutive quarterly instalments constitutes a default.  The time and resources taken to recover a defaulted loan vary from case to case depending on the complexity and specific circumstances of the case.  The average administrative cost incurred by SFAA in processing default cases (See Note 1), inclusive of staff cost and related departmental expenses, during the past five years is as follows -

Financial Year     Average administrative cost required
                      for processing a default case
  2000-01                       $264
  2001-02                       $429
  2002-03                       $583
  2003-04                       $380
  2004-05                       $293

(b) It is SFAA's standing policy to encourage students with genuine difficulty in repaying their loans to approach it to work out together the best repayment arrangements for them, such as rescheduling of the repayment schedule. To safeguard public money, SFAA would not resort to writing off loans until all reasonable ways to recover the loans have been exhausted.  Generally speaking, SFAA would consider writing off loans in the following circumstances -

(i) loan borrowers and their indemnifiers remain untraceable despite SFAA?s continuous effort in locating them and further efforts will not be cost-effective or in the public interest;

(ii) loan borrowers and their indemnifiers are discharged bankrupt; and

(iii) the loan borrowers are deceased.

    The number of cases and the amount which has been written off in the past five years are as follows -

Financial Year   Total number       Total amount
                of cases            written-off ($m)
2000-01             0                     0
2001-02             3                     0.086
2002-03             4                     0.059
2003-04            15                     0.337
2004-05             4                     0.220

(c) So far SFAA has not dealt with any default case in which its  administrative cost is higher than the amount of loans defaulted.

(d) SFAA has started to compile since 2002-03 statistics with breakdown of the number of defaulters with two or more overdue instalments.  The number of defaulters with two and three overdue instalments and the loan amount overdue at the end of each of the financial years since 2002-03 are as follows -  

Financial Year                2002-03   2003-04   2004-05

Number of loan                 611        731       1210
borrowers with 2              [3.28]     [3.912]   [5.01]
overdue instalments
[Loan amount overdue ($m)]

Number of loan                 437        654       733
borrowers with 3              [4.11]    [4.952]    [5.17]
overdue instalments
[Loan amount overdue ($m)]

    SFAA assigns dedicated staff to take recovery actions against defaulters.  The number of staff involved in the past five years is as follows ?

Financial Year          No. of staff for handling 2
                        or more overdue instalments
                          (i.e. defaulters)
  2000-01                        2.6
  2001-02                        7.6
  2002-03                       18.6
  2003-04                       16.8
  2004-05                       18.6


    SFAA strives to provide quality and timely services to the public through flexible deployment of staffing resources, streamlining of workflow and procedures, and constant review of workload and staffing deployment.

Note 1:

Taken as the number of outstanding cases as at end of respective financial year and cases concluded during the year

Ends/Wednesday, May 18, 2005


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