Don't coddle students who default on loans

PUBLISHED : Tuesday, 15 November, 2011, 12:00am
UPDATED : Tuesday, 15 November, 2011, 12:00am


Officials at the Student Financial Assistance Agency should feel ashamed for proposing unworkable solutions to clamp down on student loan defaults. It's a no-brainer. The agency's suggestion to lengthen the repayment period and lower interest rates will help to increase the number of defaults, not cut it.

Because the loan schemes are non-means-tested, many university students borrow the money (which can be as much as HK$400,000) to gamble in the stock market or elsewhere. If they make a killing, they repay the loan. If they lose every cent, they simply walk away. If push comes to shove, they declare bankruptcy. They seem pretty sure the government can't touch them.

The school year that ended in August 2010 saw a 20 per cent rise in loan defaults from a year earlier. About 13,000 graduates failed to repay loans totalling HK$213million, which, of course, is taxpayers' hard-earned money.

The relevant government departments should shame these irresponsible so-called elite of Hong Kong by prosecuting each one of them.

The student-loan agency should also share the credit data of these graduates with other credit agencies so that all banks, and perhaps their prospective employers, would know how selfish they are.

The agency's current proposals are a non-starter. They will only worsen the situation. Indeed, university students who plan to speculate in the stock market with the money would welcome the news with glee that borrowing rates will be cut to 1.674 per cent a year from 3.174 per cent, and the repayment period lengthened to 17 years (including a grace period of two years), from 10.

Under the agency's misconceived suggestions, taxpayers have to dole out another HK$75 million a year.

Why should we subsidise those immoral graduates who lose money in speculation? Can anyone reconcile the fact that Hong Kong's economy improved last year and yet the number of student loan defaults jumped by 20 per cent?

The rise in defaults underscores the fact that moral education in Hong Kong's education system has room for improvement.

It's hardly news that a huge number of university students sell their rights to buy computers at a discount to 'professional traders' to make a fast buck. The discount scheme is offered to university students at the beginning of an academic year.

Naming and shaming the defaulters is the only solution to deter these irresponsible students. They must be warned of the dire consequence of not paying back their loans. Deterrence is the only weapon.

Victor Fung Keung, based in Hong Kong, is a commentator on education and political issues