Student loan agency criticised over HK$608m in default arrears
The Student Financial Assistance Agency has been criticised by the Director of Audit for slow loan recovery work, leading to default arrears totalling more than HK$608 million.
The audit report put the agency, which administers tertiary students' financial assistance schemes, under intense scrutiny. It singled out a series of shortcomings including wrong assessment of loan amounts, failure to promptly recover outstanding loans and insufficient action to deter applicants from providing inaccurate information.
The report covered five means-tested and non-means-tested financial assistance schemes for post-secondary and tertiary students.
It stated that the number of defaulters who failed to repay two or more consecutive instalments and had not applied for repayment deferment had risen by 35 per cent from 9,769 in 2007 to 13,263 this year. The defaulters from the five financial assistance schemes owed a total of HK$608.9 million, including principal, interest and surcharges.
After failed bids to recover loans from defaulters, the agency was also found to have been slow to refer the cases to the Department of Justice.
The government is entitled by law to collect outstanding student loans within six years of the due date of the first overdue instalment. The report showed that 114 cases, with a total loan amount of HK$5.7 million, would soon be approaching the expiry date of March next year.
'The agency needs to expedite the referral of such cases to the department,' the report said. 'Otherwise, the department would not be able to take prompt legal action.'
The agency was also blamed for failing to effectively authenticate financial information provided by applicants and for giving out too much financial assistance.
The agency conducted authentication checks on 5,200 successful applicants in the 2006-07 and 2007-08 academic years for two means-tested financial assistance schemes. Some 781, or 15 per cent, provided inaccurate information.
Examples included understating salary amount and failing to declare bank deposits or assets. Because of the inaccurate information, the agency overpaid more than HK$11.9 million in assistance.
As the agency only refers serious omission cases or cases involving forged documents to police, only 5 per cent, or 39 cases, found to have provided false information were handed to police. For the remainder, the agency only issued warning letters and took action to recover the overpaid amount.
The report said such 'lenient' follow-up work in tackling possible cheats would not be enough to deter future applicants from committing similar offences. 'The agency should streamline the internal procedures of referring omission cases to police to impress upon potential applicants the seriousness of such acts,' it said.