AGO report on MOE: How much is ‘only 1.4 per cent’?

Aug 03, 2016 10.00AM |

by Glenn Ong

WHAT can $7.16 million get you in Singapore?

A 5,000 sq ft bungalow in Bukit Timah, for starters. What about four brand new Ferraris – COE included – with change to spare?

Well, that’s the amount – $7.16 million – that “may be unrecoverable” from outstanding students loans from all higher education institutions, the Ministry of Education (MOE) said. This was in response to the Workers’ Party’s statement on the lapses stated in the Auditor-General’s report for financial year 2015/2016.

The WP’s statement included a claim that more than “half of the scholars selected by the AGO for test-checks failed to fulfil their scholarship obligations”, which MOE has clarified is “incorrect”.



The WP intends to ask a number of questions relating to the report in Parliament after the Auditor-General’s Office (AGO) called the MOE out for failing to “ensure that tuition fee loans and study loans due were promptly recovered and prompt follow-up actions were taken on long outstanding loans“.

Taken in context, however, MOE said that the sum that it may not get back is “only 1.4 per cent” of all student loans, which, in total, amounts to $511.49 million.


Here’s a breakdown of who said what, and when:

In its audit report, the AGO said that out of 30 scholars it checked who were not serving their bonds, there were 14 cases in which MOE delayed sending letters of reminder/demand. This is probably where the WP got their statistic that “half” of the scholars the AGO checked had defaulted, which, again, MOE says is “incorrect”.

In addition, the AGO said that MOE still has $511.49 million of student loans from all Institutes of Higher Learning combined to collect, of which $228.04 million were owed by former students of NUS and NTU. This is the part which needs clarification: Scholarships are not the same as student loans. Scholarships come with bond obligations that are repaid with employment in the ministry after graduation, while loans are repaid in cash and do not bond the student to any form of employment post-graduation.

The AGO report made no reference to anyone – whether scholars or borrowers – defaulting. The focus of the report was on whether MOE had done its due diligence to recover its loans and ensure its scholars served their bonds.

MOE, however, did talk about defaulters in response to the WP, but what the ministry referred to was loan defaults, not scholarship defaults. It said that those student loans that “may be unrecoverable” account for “only 1.4 per cent” of $511.49 million, which as we have seen, is $7.16 million – still a huge sum.

MOE had also previously argued that study loans are different from other commercial loans, and that the “compassion” it exercised towards borrowers with financial difficulties justified the delays. However, economist Donald Low has called this “very bad and confused (economic) reasoning”.



Loan defaults in context

So how does the 1.4 per cent default rate, as stated by MOE, compare to others?

In comparison to car loans, the latest available data by Credit Bureau Singapore shows that car loan delinquency across all age groups ranged from 2.69 per cent to 4.79 per cent between 2003 and 2012.

What about student loan defaults in other countries? In the United States, the default rate is often in the double digits – the national rate was almost 12 per cent at the end of last year, with some schools facing a default rate as high as 26 per cent.

In the United Kingdom, about 24.5 per cent of student loans belong to British students residing outside the UK whose contact details are unverifiable. While this figure is not the default rate, it highlights the grave problem the UK has with unpaid student loans, which is so serious it could cripple their education budget.


Featured image by Natassya Diana.

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