... and university students merit better loans scheme

More than HK$160 million is a lot for the taxpayer to be out of pocket for extending loans to students to help them through university. That was the accumulated total of repayment defaults in September 2005. But the government is right to shelve a plan for washing its hands of non-means-tested loans and leaving them to the banks.

Thanks to wealthy parents or corporate support, as exemplified above by international schools, a privileged minority are assured of the best education money can buy. But the remainder face lean years at university if they are to complete their education before entering a demanding employment market.

By giving students a measure of financial security, the loans schemes, both means-tested and not, have rendered a service of lasting value to the community that is not justly reflected in their dismal accounts. There is a case to be made that now is not the time to abandon students to the financial marketplace. Hong Kong's need for an assured flow of more tertiary educated workers justifies direct taxpayer support. Legislators agreed by throwing their support behind opposition to privatisation by student unions.

The value of loan defaults more than doubled from 2003 to 2004. But in the aftermath of Sars and the economic downturn, students were far from alone in the city's default ledgers. The fact is that without the loans, many students would not be able to afford a university education. That would diminish the value of the community investment in primary and secondary education that is a preparation for higher academic or skills learning.

Given its need for a more educated workforce, Hong Kong may not be ready yet for market forces in student lending. Educators worry whether students in disciplines with weaker job and salary prospects would lose out.

The community interest would be well served if the government focused on tighter screening for fraudulent applications and the risk of default, restructuring repayments to make them easier in the first year or two in the workforce, and providing some free instruction in financial management skills.