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LCQ8: Non-means tested loan schemes applicable to post-secondary students
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Following is a question by the Hon Albert Ho and a written reply by the Secretary for Education, Mr Michael Suen, in the Legislative Council today (May 14):

Question :

    Regarding the default cases of the three non-means tested loan schemes applicable respectively to different types of post-secondary students, will the Government inform this Council:

(a) given that as at January 31 this year, there were 6,677 default cases of the Non-means Tested Loan Scheme applicable to students not covered by the Tertiary Student Finance Scheme íV Publicly-funded Programmes and the Financial Assistance Scheme for Post-secondary Students, of a breakdown of such cases by the types of the programmes (publicly-funded degree programmes, self-financing degree programmes and sub-degree programmes, etc.) the borrowers were taking when they applied for the loans, as well as the respective amounts of money in default;

(b) of the number of cases in which the borrowers failed to make repayment on or before the relevant due dates after they had applied to the Student Financial Assistance Agency ("SFAA") for partial repayment of their loans in the past five years and the amount of money involved, as well as a breakdown of such figures by the loan schemes; whether SFAA classifies these cases as default cases; if not, how SFAA classifies them; and

(c) of the reasons why SFAA has set the overdue interest rate for borrowers defaulting on repayments at a level higher than the prevailing interest rate under the various loan schemes (with a difference of 0.951% per annum between the two rates)?


Reply :

Madam President,

(a) Students of the Open University, students of the Hong Kong Shue Yan University, students pursuing part-time publicly-funded programmes or self-financing award-bearing programmes offered by publicly-funded institutions (including their school of professional and continuing education), students pursuing programmes offered under the "Project Yi Jin", and persons pursuing continuing and professional education courses offered by registered schools, non-local universities and recognised training bodies may apply for loans to pay for their tuition fees under the Non-means-tested Loan Scheme applicable to students not covered by the Tertiary Student Finance Scheme íV Publicly-funded Programmes (TSFS) and the Financial Assistance Scheme for Post-secondary Students (FASP).  In view of the large number of study programmes involved, the Student Financial Assistance Agency (SFAA) has not maintained statistics on default cases by the types of study programme.

(b) 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 loan borrowers tide over their difficulties, SFAA will, on the basis of individual merits, approve deferment of loan repayment.  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.  If a loan borrower has applied for partial repayment but failed to make the relevant repayment on the due date, SFAA will take the application as having been withdrawn by the loan borrower, and will request the loan borrower to repay the loan according to the original loan repayment arrangement.  Regardless of whether the loan borrower has at times repaid on time, if he subsequently fails to repay two or more consecutive quarterly instalments, he will be classified as a defaulter.  SFAA has not maintained statistics on cases where loan borrowers had applied for partial repayment but failed to make the relevant repayment on or before the due dates.

(c) At present, loans provided under the various non-means-tested loan schemes do not require a means test or support of any collaterals.  Interest rate is calculated on a no-gain-no-loss and full-cost-recovery basis.  The prevailing interest rate is 4.382% per annum.  Upon completion or cessation of their studies, loan borrowers are required to repay the relevant loans and interest in quarterly instalments within 10 years.  Loan borrowers are required to pay overdue interest at a rate equal to the average best lending rate of the note-issuing banks if they fail to make their loan repayments on time.  The prevailing overdue interest rate is 5.333% per annum. 
   
    The overdue interest rate is higher than the interest rate for non-means-tested loans.  This is to encourage loan borrowers to make loan repayment on time and to prevent abuse of the loan schemes.  The arrangement of overdue interest will only affect those borrowers who have breached their undertaking and evade their responsibilities in loan repayment.  It will not affect the borrowers who repay their loans on time, or who have genuine difficulties in loan repayment but have approached SFAA for assistance.

Ends/Wednesday, May 14, 2008
Issued at HKT 12:01

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