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LCQ19: Post-secondary students defaulting on loan repayments

    Following is a question by the Hon Emily Lau and a written reply by the Secretary for Education, Mr Michael Suen, in the Legislative Council today (April 30):


    It has been reported that as the problem of post-secondary students defaulting on loan repayments was serious (with the amount in default totalling $117 million in the 2006-2007 academic year), the Student Financial Assistance Agency is considering to provide to credit reference agencies the information of those loan borrowers who have failed to repay two or more consecutive quarterly instalments, so as to deter the borrowers from defaulting on repayments without reasons. In this connection, will the Executive Authorities inform this Council whether:

(a) they have assessed if the above practice will affect the borrowers' chance of obtaining approvals from banks loans, credit cards and mortgage loans in the future, and whether it will contravene the relevant provisions of the Code of Practice on Consumer Credit Data promulgated by the Office of the Privacy Commissioner for Personal Data, Hong Kong; if they have, of the assessment results; and

(b) they will take the initiative to look into the reasons why the borrowers default on loan repayments and take follow-up actions, with a view to assisting such borrowers in repaying their loans as soon as possible?

Reply :


(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 circumstances, 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 encounter difficulties in repaying their loans and has therefore put in place an effective mechanism for handling such problems. 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 their 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. As at 31 January 2008, there are about 6 000 default cases under the Tertiary Student Finance Scheme íV Publicly-funded Programmes, the Financial Assistance Scheme for Post-secondary Students, and relevant non-means-tested loan schemes, involving an overdue amount of about $126 million.

    We are concerned about the default problem, and will endeavour to ensure public money is not misused. SFAA has reviewed the debt collection process, streamlined the workflow, and deployed additional staffing resources to expedite debt recovery through legal means. In addition, SFAA has enhanced the publicity in relation to prudent financial management, and has been working closely with the post-secondary institutions to brief students on various loan schemes and the corresponding loan repayment arrangements. It has reminded the students to seriously consider their financial needs and repayment abilities before applying for loans, and stressed the importance of prudent financial management and making repayment on time.

    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 loan repayment without reasons, there was a suggestion that SFAA should provide the information of the defaulters to relevant credit reference agencies. SFAA is exploring the feasibility of the suggestion and will ensure compliance with the requirements under law or the relevant code before any new measures are implemented. We believe that the suggestion will help protect public money and will only affect loan borrowers who have breached their undertaking and evaded the responsibilities in loan repayment. It will not cause problem to loan borrowers who repay their loans on time, or who have genuine difficulties in loan repayment but have approached SFAA for assistance.

(b) Most of the defaulters have disregarded the notices of loan repayment and reminders issued by SFAA. They have not approached SFAA to resolve their outstanding loans, to disclose the reasons for default or to seek assistance. We are therefore unable to ascertain why they default on loan repayments. Since SFAA has already put in place a mechanism to assist loan borrowers with difficulties in repayment on financial, study or health grounds, we believe that the default is not due to these reasons.

Ends/Wednesday, April 30, 2008
Issued at HKT 12:01


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