FCR(98-99)44

For discussion
on 13 November 1998

HEAD 176 - SUBVENTIONS: MISCELLANEOUS
New Capital Account Subhead "One-off grant to the Student Loan Fund of the Open University of Hong Kong"

Members are invited to approve a one-off grant of $50 million to the Student Loan Fund of the Open University of Hong Kong.

PROBLEM

The Student Loan Fund of the Open University of Hong Kong (OUHK) has insufficient funds to operate means-tested student loan schemes to assist adult learners who might otherwise be deterred from receiving tertiary education.

PROPOSAL

2. The Secretary for Education and Manpower (SEM) proposes to make a one-off grant of $50 million to the Student Loan Fund of the OUHK to meet the increased demand for loans.

JUSTIFICATION

3. The OUHK is a self-financing institution with tuition fees as its main source of income. It now charges, on average, $950 per credit. A student on the average takes 20 credits a year and has to pay $19,000 annually or about $1,580 per month. To help OUHK fulfil its mission of making higher education available to all those aspiring to self improvement and who are prepared to pay for it, we provided a one-off grant of $50 million to the OUHK in 1994 for it to establish a Student Loan Fund so that it could operate means-tested student loan schemes to help students who have financial difficulties in pursuing their studies at the OUHK. Details of the schemes are set out at the Enclosure.

4. Since their establishment in 1995, OUHK's student loan schemes have benefited about 6 490 students. Partly owing to the relaxation of the eligibility criteria to cover new students¹ and partly because of increased enrolment, the number of loan applications increased from 1 368 in the October 1997 semester to 3 096 in the April 1998 semester, representing a 126% increase over the period. Total loan applications increased by a further 13% in the October 1998 semester. The total fund available for disbursement in the Student Loan Fund was insufficient to satisfy the demand. Consequently, the success rate dropped from 99.8% in October 1997 to 48.4% in October 1998.

5. The extension of the Non-means Tested Loan Scheme (NLS)² to cover OUHK students from the current academic year will benefit some students and partially alleviate the call for funding support from the Student Loan Fund. However, there remains groups of needy students, in particular the unemployed, temporarily unemployed, new immigrants and low income earners, who will need the support of low-interest loans under means-tested schemes in order to pursue their studies. We therefore propose a one-off grant of $50 million to OUHK's Student Loan Fund to ensure that it will continue to have the means to assist needy students. We estimate that this proposal would benefit about 2 000 additional students a year.

FINANCIAL IMPLICATIONS

6. Subject to Members' approval of this proposal, we will make the one-off grant of $50 million to the Student Loan Fund of OUHK in one single payment in 1998-99. We will offset the supplementary provision required in 1998-99 by deleting an equivalent amount from Head 106 Miscellaneous Services Subhead 789 Additional commitments.

7. Despite the increase in the capital for the Student Loan Fund through this further grant from Government of $50 million, the conditions relating to the management and investment of moneys in the Fund as set out in the Enclosure will remain the same.

BACKGROUND INFORMATION

8. The OUHK (formerly known as the Open Learning Institute of Hong Kong) was established in 1989 to provide, through open access and distance learning, tertiary education opportunities for adult learners who did not have the opportunity of receiving tertiary education when they left school. It is also the key provider of continuing education and retraining to upgrade the workforce to adapt to technological, economic and social changes. The OUHK complements the formal tertiary education system and promotes life-long learning in Hong Kong. It obtained university status in May 1997. There are at present over 24 000 students enrolled in 44 degree and postgraduate programmes and 27 sub-degree programmes. The OUHK also offers some 280 short courses to 6 000 students for vocational training and professional upgrading.

9. In the past few years, we have provided capital grants to support worthwhile initiatives of the OUHK on several occasions. These include the initiatives to develop OUHK into a centre of excellence in adult education and distance learning, establish an electronic library, develop courses and conduct research.

Education and Manpower Bureau
November 1998

Enclosure to FCR(98-99)44

Background

Finance Committee of the Legislative Council approved in June 1994 a one-off grant of $50 million to the OUHK (formerly known as the Open Learning Institute of Hong Kong) for establishing a student loan fund. It was intended to be a revolving fund to assist needy students in the payment of OUHK's tuition fees. The OUHK has to invest moneys in the Fund in accordance with guidelines set by the Secretary for Education and Manpower. It may apply the fund in pursuit of its purpose, on condition that the capital sum to be kept for investment should not fall below $25 million.

Eligibility Criteria

2. All registered students pursuing sub-degree or degree courses are eligible to apply for loan assistance. Applicants are subject to a means test.

Repayment

3. There are two loan schemes - "Pay-on-graduation" (POG) and "Pay-as-You-Learn" (PAYL). POG loan is repayable upon graduation whilst PAYL is repayable on a regular basis during the study period.

Interest

4. Interest is accrued upon the drawdown of the loan. Interest is charged at 3% per annum for PAYL loans or 3% of the total loan amount for POG loans.

Administration

5. The OUHK administers the loan schemes on the advice of the Student Loan Management Committee set up by the OUHK Council.

Latest Position

6. Since 1995, the OUHK has disbursed $64.8 million PAYL loans to 5 903 students and $6.8 million POG loans to 588 students.

1.Previously students must have enrolled and passed at least one examination to be eligible for loans.

2.The NLS was introduced in the 1998/99 academic year to provide an additional channel of finance to tertiary students. It operates on a cost-recovery and no-gain-no-loss basis. With the approval of Finance Committee in July 1998, the NLS was extended to students of the OUHK.