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LCQ10: Post-secondary students loan

    Following is a question by the Hon Tsang Yok-sing and a written reply by the Secretary for Education, Mr Michael Suen, in the Legislative Council today (January 23):


     It has been reported that information from the Student Financial Assistance Agency indicates that there were more than 6,300 cases of post-secondary students defaulting loan repayment in the 2006-2007 academic year, almost 10% more than those in the 2005-2006 academic year, and the amount involved was $117 million; at the same time, the number of graduates filing for bankruptcy to evade repayment of loans had rapidly increased by 40%.  Moreover, since the 2005-2006 academic year, the Agency has referred to the Police 67 cases involving deception in loan application for investigation.  A study also found that nearly 10% of university students used loans, which were obtained from the Agency's Non-means Tested Loan Scheme, to speculate in stocks.  In this connection, will the Government inform this Council whether it has :

(a) analysed the reasons for the increase in cases of students defaulting loan repayment; if it has, of the outcome; if not, the reasons for that;

(b) plans to take proactive measures to minimise cases of default in loan repayment; if it has, of the details of such plans; and

(c) plans to cooperate with various post-secondary institutions to step up publicity and education in respect of student financial assistance and loan schemes in order to curb the misuse of loans or default in loan repayment?


Madam President,

(a) It is the Government's student finance policy to ensure that no student is deprived of education for lack of means.  Students of post-secondary institutions may, depending on their situations, apply to the Student Financial Assistance Agency (SFAA) for financial assistance to pay for their tuition fees, academic expenses and/or living expenses.  Upon completion or cessation of their studies, loan borrowers are required to repay their loans in quarterly instalments within 5 or 10 years, in accordance with the terms for the loans.

     SFAA appreciates that individual loan borrowers may have difficulties in repaying their loans and therefore has put in place an effective mechanism for handling such situations.  If loan borrowers are unable to repay their loans owing to financial hardship, further studies or serious illness, they may apply to SFAA for assistance with support of documentary proofs.  To help the loan borrowers tide over the difficulties, SFAA will, on the basis of individual merits, approve deferment of loan repayment, temporary adjustment of the quarterly repayment amount or extension of the repayment period.  We encourage loan borrowers with difficulties in repayment to approach SFAA for assistance.

     Statistically, SFAA classifies loan borrowers who have failed to repay two or more consecutive quarterly instalments as defaulters.  This does not include those who have been allowed to defer repayment.  In the 2006/07 academic year, there were about 6 300 default cases under the Tertiary Student Finance Scheme ¡V Publicly-funded Programmes, the Financial Assistance Scheme for Post-secondary Students, and relevant non-means-tested loan schemes, involving an amount of about $117 million.

     Since most defaulters had not approached SFAA to resolve their outstanding instalments of loan, nor had they disclosed to SFAA their reasons for the default or sought assistance from it, we are unable to come up with an analysis of the specific reasons for the increase in default cases.  As SFAA already has a mechanism to assist loan borrowers with difficulties in repayment on financial, study and health grounds, we believe that the increase in default cases should not be due to the abovementioned reasons.

(b) We are concerned about the default problem, and will endeavour to ensure public money is not misused.  SFAA has reviewed the debt collection process and streamlined the workflow, and will deploy more staffing resources to expedite debt recovery through legal means.

     SFAA has enhanced the publicity in relation to prudent financial management.  As set out in the application guidance notes, students are reminded to assess their financial needs and repayment ability before applying for loans.  They are also reminded that failure to make repayment is subject to surcharge or higher interests, and may lead to legal proceedings against them.  In the letters of notification of commencement of loan repayment, SFAA also reiterates the importance of repaying the loans on time, and encourage loan borrowers with repayment difficulties to approach it for assistance.

     SFAA is aware that some loan borrowers have changed their correspondence address without notifying the Agency, and hence may not have received the demand notes and subsequent reminders.  These loan borrowers have not on their own accord made repayment on the respective due dates.  SFAA will check the latest correspondence addresses of these loan borrowers with other government departments as permitted under law.

     In addition, SFAA has sought the advice of the Joint Committee on Student Finance on measures to reduce the number of default cases.  In order to deter loan borrowers from defaulting without reasons, there was a suggestion that SFAA should provide the information of the defaulters to relevant credit reference agencies.  SFAA is considering the suggestion and will actively pursue it with a view to improving the default situation.

(c) SFAA has been working closely with the post-secondary institutions to curb the abusive use of loans or default in loan repayment.  Through various channels (including briefing sessions, production and distribution of compact discs and promotion leaflets), it has briefed students on various loan schemes and the corresponding repayment arrangements, reminded them to seriously consider their financial needs and repayment ability before applying for loans, and stressed the importance of prudent financial management and making repayment on time.  Relevant promotion leaflets have been uploaded to SFAA¡¦s website for loan borrowers¡¦ reference.  To enhance the publicity and education in relation to various loan schemes, SFAA is considering providing the number of graduates found to be in default to respective institutions, so as to facilitate the institutions in drawing up corresponding publicity and education measures.

Ends/Wednesday, January 23, 2008
Issued at HKT 16:16


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