For discussion
on 3 October 1997
FCR(9798)40
ITEM FOR FINANCE COMMITTEE
HEAD 173  STUDENT FINANCIAL ASSISTANCE AGENCY
Subhead 152 Scholarships, bursaries and maintenance grants
LOAN FUND
HEAD 254  LOANS TO STUDENTS
Subhead 111 Students of approved postsecondary colleges
Members are invited to approve changes to the way in which we determine the annual financial provision for awarding grants and loans to students of the
Hong Kong Shue Yan College under the Student Finance Assistance Scheme with effect from the 199798 academic year.
PROBLEM
The existing formula for determining the cashlimiting provision for the Student Finance Assistance Scheme (SFAS) available to students of the Hong Kong Shue Yan College (HKSYC) is no longer appropriate.
PROPOSAL
2. We propose to replace the existing formula by the arrangements described in paragraphs 8 and 9 below with effect from the 199798 academic year.
JUSTIFICATION
Existing arrangements
3. The SFAS provides grants and loans to eligible students undertaking the fouryear diploma course at the HKSYC. Funds for the grants are included under Head 173 Student Financial Assistance Agency Subhead 152 Scholarships, bursaries and maintenance grants while loans disbursed are provided under the Loan Fund Head 254 Loans to Students Subhead 111 Students of approved postsecondary colleges. As the SFAS operates on a cashlimited basis, the annual financial provisions available will directly affect the number of students benefiting from the scheme as well as the amounts of grants and loans they receive. In practice, Student Financial Assistance Agency will determine the financial assistance granted to each student having regard to the following factors 
 the amount of funds available and the total number of students applying for assistance;
 a family income index; and
 a sliding scale applied to the family income index, which assesses the relative needs amongst students.
4. In addition, the grant and loan awarded to individual students are subject to a maximum limit. Finance Committee last approved the maximum limits for grants and loans in 1991 and delegated to the Secretary for the Treasury the authority to adjust annually the maximum limits in accordance with the movement of the Consumer Price Index (A) (CPI(A)). The maximum limits are $7,900 for grants and $17,300 for loans in 199697.
5. The total amount of funds available for the SFAS is worked out according to a formula approved by the Finance Committee in 1983. Under the formula, we calculate the annual provision separately for grants and loans under the respective expenditure subheads by taking 
 the maximum grant or loan; multiplied by
 the average grant or loan awarded in the last three years expressed as a percentage of the maximum for those three years; multiplied by
 approved enrolment of HKSYC; multiplied by
 the percentage of students awarded grants or loans in the preceding academic year.
6. The formula has turned out to be quite restrictive. Put simply, it has resulted in a smaller total annual provision available for the scheme in some years, and hence reduced financial assistance for the students, even though the number of students receiving assistance has increased. The following table shows the levels of the cashlimited provision of loans, the number of students receiving loans and the average loan which they received under the SFAS in the past six years 
Academic year  Cashlimited provision for student loans$ ’000  Number of students receiving loans  Average loan$


199192  3,463  724  5,152

199293  5,746  719  6,363

199394  8,110  740  7,444

199495  6,805  812  8,034

199596  5,914  825  7,074

199697  7,710  872  8,719

Revised arrangements
7. To rectify the abovementioned anomalies, we propose to adopt revised arrangements, in line with our current practice in budgetary planning, to determine the annual financial provisions for SFAS, in place of the formula. To improve the SFAS, we have earmarked funds of $7.4 million for the award of grants and $16.7 million for the disbursement of loans in the 199798 Estimates under the relevant expenditure subheads. They represent increases of 38% and 116% of the total financial provision for grants and loans respectively in 199697. With these increases in provision, we estimate that the average grant and loan received by HKSYC students in the 199798 academic year would be about $8,000 and $17,000 respectively, against the corresponding maximum levels of $8,400 and $18,300 after the annual adjustments for inflation. On the basis of the improved average grant and loan, the total level of financial assistance for HKSYC students would increase by about 53% in real terms.
8. We propose that the financial provision of $7.4 million for grants and $16.7 million for loans in the 199798 Estimates should be adopted as revised cash limits for the SFAS. We will adjust these provisions for inflation to maintain their real value in the preparation of future Estimates. We will consider any real increases in the financial provisions for the SFAS in the normal manner, that is, subject to the overall budgetary constraint and priority in resource allocation.
9. Grants and loans awarded to individual students under the SFAS will continue to be subject to the current maximum limits. The Secretary for the Treasury will continue to revise, under delegated authority, these maximum limits annually having regard to the movement of the CPI(A).
FINANCIAL IMPLICATIONS
10. We have included sufficient funds in the 199798 Estimates for implementing the revised calculation of financial provisions for the SFAS.
BACKGROUND INFORMATION
11. Established in November 1965, the SFAS is a cashlimited scheme which provides financial assistance to students of the former Colleges of Education and approved postsecondary colleges. Students attending fulltime fouryear diploma courses at HKSYC became eligible for financial assistance under the SFAS in the form of loans from 197980 and grants from 199192. As a privatelyrun postsecondary college not subject to Government scrutiny in terms of enrolment and duration and tuition fee levels, HKSYC is now the only institution covered by the SFAS. Students of the former Hong Kong Baptist College, the Lingnan College and the former Colleges of Education previously covered by SFAS now receive financial assistance under the Local Student Finance Scheme.
Education and Manpower Bureau
September 1997