UNIVERSITY TUITION FEES

11.55 am

Dr Tony Tan Keng Yam: Mr Speaker, Sir, Members will remember that in March 1985 and again last year during the debate on the Estimates of the Ministry of Education in the Committee of Supply, I pointed out that students at our Universities, the National University of Singapore and the Nanyang Technological Institute, were extremely heavily subsidized by our taxpayers. To reduce the subsidy, I suggested that it would be worthwhile for us to move to the American system whereby the tuition fees are fixed at a certain percentage of the recurring cost per student for the various courses available in the Universities. In making the suggestion, I emphasized that whatever scheme we devise we must make sure that students who come from poor families are not penalized or prevented from acquiring a tertiary education simply because of their financial circumstances. Sir, it has taken some two years to work out a scheme which is equitable and workable. I would like today to inform Members of the main details.

Let me start with some statistics. Each year, some 40,000 pupils register for Primary 1 and Pre-Primary in our schools. Of these 40,000 children, 85% go on to secondary schools after passing the PSLE examinations. Those who eventually finish their secondary school education with either 'N' or 'O' levels represent 80% of the Primary 1 cohort. Approximately 50% of each Primary 1 cohort go on to some form of post-secondary education in either the junior colleges, the pre-university centres or the polytechnics and 12% of the Primary 1 cohort eventually make it to the University. Can I now ask the Clerk of Parliament to distribute an Annex?

[Copies of Annex (Cols. 107 - 108) distributed to hon. Members.] Annex - 1986 RECURRENT EXPENDITURE AND ENROLMENT (Cols. 107 - 108)

As Members can see from Annex 1, the bulk of our student population of over 500,000 are in either schools, junior colleges, pre-university centres or our technical institutions, the VITB and the two polytechnics. The number in our Universities comprise some 16,000 students representing 3% of the student population in Singapore. However, in terms of Government expenditure on education as you can see from Annex 1, 20% of total recurrent expenditure in 1986 was spent on Universities as against 80% in our schools, junior colleges, pre-university centres and the technical institutions. In other words, Sir, Government was spending each year some $14,400 to educate a student at the University level as against $1,900 for each pupil in schools, junior colleges, pre-University centres, the polytechnics and the VITB.

With most of our students studying in schools, junior colleges, pre-University centres and the technical institutions, it would be more equitable to reduce the Government's subsidy for University education and increase the amount that we can spend to upgrade the quality of education in our schools. This, Sir, we intend to do. The current proposal to make all our secondary schools single session will, for example, necessitate the building of another 40 to 50 schools with the capital cost alone amounting to over $1 billion. If we wish to reduce class size to a manageable level, we will need to train and employ an additional 3,500 teachers to staff our secondary schools. This will increase operating expenditure in our secondary schools by at least $150 million annually.

Sir, University students on graduation can aspire to be members of highly paid professions. It is only right that after they have graduated they should pay back part of the Government's subsidy in order to lessen the burden of financing University education from taxpayers' money.

For the academic year 1987/88 excluding the research institutes and the School of Accountancy which will be transferred to the NTI, the NUS has estimated an operating expenditure of $231 million. This expenditure will be financed largely through a Government grant of $189 million. The University expects to be able to raise an amount of $14 million from other revenues such as miscellaneous fees and income from investments. The balance of $28 million will have to be raised from tuition fees.

Before I announce the tuition fees for the academic year 1987/88, I would like, Sir, to reiterate the point I made at the beginning of my statement that whatever scheme we devise we must make sure that students who come from poor families are not penalized or prevented from acquiring a tertiary education simply because of their financial circumstances. To ensure that the increased fees for the academic year 1987/88 do not bar bright children from poor families from obtaining a University education, the Government has earmarked a sum of $100 million to be operated as a revolving fund to finance student loans which will be given liberally to students at the NUS and the NTI. The terms of the loans will be as follows:

First, the amount of the loans will be 50% of the new fees to be charged for the academic year 1987/88. Second, the interest rate will be the average of the prime lending rates charged by the Big Four local banks. Third, repayment will be over a maximum period of 15 years, depending on the size of the loan, and commencing not later than one year after graduation. Fourth, one guarantor above 21 years will be required, but no income or residential qualifications will be stipulated for the guarantor.

Now, Sir, I come to the tuition fees for the current year 1987/88. These are shown in Annex II (Cols. 109 - 110). (Copies of document distributed to Members.) As Members will see, they are divided into three categories, one for the non-laboratory based faculties; (2) for the laboratory based faculties and (3) for dentistry and medicine. Now, Sir, a word on how the new fees are worked out. First of all, these fees will apply to both the NUS and the NTI. The fees are worked out on the following principles. The new fees will achieve a cost recovery of 16% of the average 1987/88 budgetted operating cost per Singapore student in the non-laboratory based faculties, which are Accountancy and Business Administration, Arts and Social Science and Law, as against 12% for 1986/87. For the laboratory based faculties which are Architecture and Building, Engineering and Science, the new fees will represent a cost recovery of 15% for 1987/88 as against 10% for 1986/87. For the Medical and the Dental faculties, the cost recovery for 1987/88 is 9% as against 4% for 1986/87. For foreign students, which means non-Singaporeans and non-permanent residents, the fees will be set, as of now, at 50% above those for Singapore students, and the new fees will apply to existing as well as to new students but with national servicemen enjoying a two-year lag as at present in accordance with present practice. Annex II - NATIONAL UNIVERSITY OF SINGAPORE AND NANYANG TECHNOLOGICAL INSTITUTE TUITION FEES AND LOANS FOR ACADEMIC YEAR 1987/88 (Cols. 109 - 110)

With the new fee structure, tuition fees will now fund 12% of the estimated 1987/88 operating cost excluding the capital cost of the NUS as against 8% in 1986/87. With the loan scheme that I have just announced, the amount of fees in 1987/88 that a student studying in the faculties other than Medicine and Dentistry will have to pay from his own funds in cash will be either the same or, in fact, less than the amount the student had to pay in 1986/87. For a Singapore student who is studying either Medicine or Dentistry, he will have to pay in cash $650 more than in 1987/88 than in 1986/87. I think that this should be within the capacity of the Medical or Dentistry students to pay. And if there are genuine cases of financial hardship, then the University has other loan funds which can be used to supplement the Government loans. However, to qualify for these additional loans, I think it is only fair that the student should be required to produce evidence of genuine financial hardship.

Sir, we are a small nation with a small talent pool. We must develop every child to his fullest potential. Every student who can make it to University is an additional asset for Singapore. We must therefore at all times ensure that children from all economic groups have a chance to be admitted to our Universities. And if Uni- versity fees have to be raised further, we will make sure that there is sufficient availability of loan funds so that no student will be denied admission to NUS or to NTI simply because his or her parents cannot afford to pay the fees. Sir, this is a responsibility which Government must fulfil.

Dr Tan Cheng Bock (Ayer Rajah): Sir, the Minister mentioned that there will be a $100 million loan fund. I would like to ask him whether this is sufficient, and if this fund runs out will the students be able to continue with their University education without having to find other ways of getting money?

The other matter I would like to ask the Minister is the prime rate. He has mentioned that he is following the Big Four local banks' prime rate. Is this not too high? The prime rate as at today, I think, is 6.29%. Compare this with the CPF rate, which is about 5.38%, I would like to ask the Minister, in view of the difference in the rates, whether the parents of these students will be allowed to use their CPF rather than having to take a loan from the University loan fund?

Dr Tony Tan Keng Yam: Sir, with regard to the first question, what happens should the fund run out? Let me just say that the present provision of $100 million is much more than adequate for the next few years. For 1987/88 I think the total amount is not estimated to be more than $20 million to $25 million. So the $100 million fund will be more than sufficient for the foreseeable future. And if that is not enough, then as I said before, Sir, we must make sure that more funds will be available.

The second question is the interest rate. Fixed at the banks' prime rate, is it not too high in relation to the CPF rate? And if that is the case, should parents not be allowed to use their CPF rather than take a Government loan? Well, Sir, CPF is not within my province. I would not presume to announce policies which are under the proper supervision of another Minister. Perhaps the Minister for Labour might like to comment.

Mr Ng Kah Ting: Mr Speaker, Sir, could I ask of the Hon. Minister for Education five questions relating to his Ministerial Statement. (1) Could he enlighten the House as to the cost for students in the Dental and Medical faculties? (2) Why try to recover only 9% in this respect and not, say, 12% or 15%? (3) What is the rationale for getting only 9% in return? (4) For how long will this increase be applicable, and (5) Will there be another upward review of fees in the foreseeable future?

Dr Tony Tan Keng Yam: Sir, the Member's first question is on the cost of educating each student in the Medical and Dental faculties. The operating cost now is in the region of over $40,000 per student each year in the Medical and Dental faculties. The second and third questions relate to why we fix the cost recovery rate of 9% as against 16% for the non-laboratory based faculties and 15% for the laboratory based faculties. Sir, I agree that it will be more equitable to have them all at the same rate, say, 15% or 16%. But this would mean that we will have to raise the fees for the medical students, perhaps by four or five times. I think it is quite high. I did consider it but, as you can see, the fees are already quite high. Perhaps we should take a bit of time before we raise it to the same level as the other faculties, although I agree with the Member that in all fairness there is no reason why students studying Medicine or Dentistry should, in principle, enjoy a higher subsidy than those studying in the other faculties. But it is best not to try and do too much at one stage and I think this can be adjusted over a period of time. But I will keep in mind what the Member has just raised.

The fourth and fifth question is how long will this increase last and whether there will be another upward increase in future years? Sir, I have always taken the view that in terms of education and in terms of fees, one should not try to rush things. This increase was necessary and, as I have explained to Members, it has taken us some two years to work out a scheme which, I believe, is now fair and workable. I would hope to allow these fees to settle down for one or two years. We may have to make a small increase in 1988 but I would not like to see another major increase coming too soon after this one.

Mr Chiam See Tong: I notice, by this increase of fees, there will be a saving of at least $28 million which has to be paid for by tuition fees. Will this benefit go to the junior colleges and technical institutions? You said here, "Do they pay less over the other side?" That is one question.

I notice the fee increase is almost twice or three times. Is there a necessity for this big jump, rather than increase it by stages? The third question is: what is the position of our Malay students? Do they still get their benefits under our Constitution? The fourth question is this. I have been told that some foreign students are currently getting half-grants from our local University. What is their position then?

The other question is: why are we charging the foreign students rather low tuition fees at only 50% extra when compared to our own students? When you go to foreign universities, you find that their own students go into their universities almost free, with a lot of liberal grants, but foreign students are charged probably 10 times the amount. So why are we charging only 50% more? Can we not charge our own students less and, perhaps, increase the fees for foreign students?

Dr Tony Tan Keng Yam: Sir, with regard to the first question from the Member for Potong Pasir, there is no saving of $28 million. The $28 million is required by the University to meet its operating expenses for 1987/88. So the University will not be saving any money.

Secondly, the reason for the size of the jump or the increase in the fees. I have already explained that we would like to reduce the subsidy for university education over a period of time so as to be able to spend more on education in our schools, junior colleges, polytechnics and VITB where the majority of our students are.

Thirdly, with regard to the question about Malay students, they will enjoy the privileges specified in the Constitution.

Fourthly, the question about foreign students with half-grants. I am not quite sure about that point. Perhaps the Member might be referring to students who are on university scholarships. If he can let me have the details, then I will give him the reply. Would that be all right?

Mr Chiam See Tong: I understand that foreign students are given half-grants, and they have to sign a bond whereby they have to work in Singapore for at least three years.

Dr Tony Tan Keng Yam: No, that is not true then. In that case, there are no foreign students who have been given half-grants. All foreign students are bonded to work in Singapore for three years after they graduate. If they do not work in Singapore, then they have got to pay back essentially the full cost of their university education here, which is at a very much higher rate.

The final question is, why should we not raise tuition fees for foreign students much more than the current 50% more than our own local students, and thereby charge our local students less? Sir, this comes back to the point which I made at the end of my ministerial statement. We are a small talent pool here, Sir. We must, first of all, make sure that any local student who has the ability and the talent to make it to university will be enabled to do so. And here, Sir, the very generous loan scheme provided by the Government will make it possible for any local Singapore student, no matter what his or her circumstances are, to attend University if he or she can qualify.

But, Sir, I would not like to have fees for foreign students fixed at so high a rate that we discourage very bright talented foreign students from joining our University here. In addition to supplementing our own talent pool, Sir, I think they are a benefit to our own University students. I have explained on many previous occasions that with all our students coming from the same type of social and home backgrounds, it is useful for them to mix with students from other countries, students who have had other experiences of life, so that our students can broaden their outlook and thereby acquire a good University education. Furthermore, all foreign students who study at NUS and NTI are required to work in Singapore for three years after they have graduated and in that case supplementing the number of skilled people which we have to service our economy.

Mr Heng Chiang Meng (Jalan Kayu): Mr Speaker, Sir, in view of the Minister's reply on the subsidy for students of medicine and dentistry, where the absolute figures of subsidy are larger and the recovery rate is smaller, may I ask the Minister whether he has figures, say, over the last 10 years, of the number of our citizens who have been trained by our University in medicine and dental surgery; and how many of these are presently practising in Singapore. It appears that we are spending most on those students who have the greatest ease of emigration to other countries.

Secondly, the Minister said that the granting of these loans will be on a very liberal basis. One can presume that a lot of students will be asking for loans; even foreign students. Therefore, I can foresee that there will be a high cost of collection of these loans, since they allow a maximum of 15 years to repay. May I therefore ask the Minister whether these costs have been worked into the scheme. In this regard, I would like to echo the Member for Ayer Rajah's call on the Minister to try and persuade his Cabinet colleague to allow the use of CPF funds because, according to the Minister for Education, money spent on education is investment whereas, according to the Minister for Labour, money spent on education is consumption.

Dr Tony Tan Keng Yam: Sir, with regard to the first question as to the numbers who have been educated in medicine or dentistry over the last 10 years, I do not have the information at hand here. I will obtain them and give them to the Member.

Secondly, with regard to whether the cost of recovering the loans will be high, I think it will be. We did take that into consideration. We have thought of making the loan conditions somewhat more strict by perhaps requiring two guarantors who must be approved by the University. But, Sir, this is the first time that we are moving to this new system and, on balance, we should make the loan scheme as liberal as possible. If, in the light of experience later on, we have to modify some of the condi- tions, this question can always be considered. But as the first step, we should make it as liberal and as easy as possible for students to get loans.

Next, the question raised by the Member and also by the Member for Ayer Rajah regarding CPF. Obviously, Sir, these points raised by Backbenchers will be taken note by the Government. I am sure the Minister for Labour will consider it very seriously. I will discuss the matter with him and eventually a paper will go to Cabinet. What the result is, I do not know.

The Minister for Labour (Mr Lee Yock Suan): Mr Speaker, Sir, since the question of CPF for education has been raised again, may I be allowed to respond? I have previously explained at some length to the House what the Government's thinking on CPF is, and that is, to confine the CPF scheme to its basic objectives. These are housing, Medisave and a minimum retirement income. If we confine the CPF scheme to these three basic objectives and do not allow ourselves to stray into all kinds of areas, we will then be able to avoid having too high a CPF rate.

We are now studying the CPF rate. What should be the long-term rate? If we want to allow CPF to be used for education, it means we must have a higher CPF rate. But the thinking of the Government now is to keep the CPF rate not too high because otherwise the economy might not be able to afford it. Also, CPF members will then have more take-home pay, more savings of their own, more funds at their disposal for whatever uses they want to use the money for. For example, they might want to use their extra income for education. If we were to concede that CPF should also be used for education, then we will have to increase the CPF rate for everybody whereas only some members will need to use the CPF for educational purposes.

As announced by the Minister for Education, the Government has already decided on a very generous loan scheme to finance those students who are able to make it to University. I think there will be no problem for these students, once they graduate, to repay these loans which will amount in most cases, other than those in dentistry or medicine, to only a few thousand dollars. There should be no problem for them to repay these amounts from their future income once they start to work. Therefore, there is no need for us to widen the CPF scheme to provide for educational expenses. This is a fundamental point. I do not want to go and debate about whether CPF for education is for consumption or for investment. The point we should ask ourselves is: what is the CPF for? Is it for education? Is it for retirement? Is it for housing? What is it for? In the past, the tendency has been to add more and more uses to the CPF. Every time there is a problem where some funds are needed, you go to CPF. As a result, the CPF rate has become higher and higher.

The question that was raised is: why do we not allow the parents to extend the loan from their CPF to the children? I think the more basic question is: should we allow CPF for education at all? Because once we allow CPF to be used as educational loans, where do we stop? Do we then allow CPF to be used for education without repayment? Should we allow it to be used for overseas education? Where do we draw the line? My fear is, once we concede to this point, we will be opening Pandora's box and again allowing CPF to go into areas which are alien to the objectives of the CPF scheme.

Mr Sia Khoon Seong (Moulmein): Mr Speaker, Sir, could I ask the Minister for Education whether or not one of the intentions of his Ministry, in increasing the fees as well as providing this loan, is to impress upon our young citizens in the University that the State is paying quite a great deal for their education and that when they graduate they are to pay back part of that cost to the University? If that is not one of the intentions, should it not be one of the intentions? If that is the intention, is it not wrong to suggest that the parents' CPF be used for this purpose? Because the buck will be passed to the parents and not to the students. I think the intention is to impress upon the students that the State is already paying so much for their education - "This is part of your cost and you must bear this responsibility." So I would like to ask the Minister: is this one of the intentions and, if not, should this not be one of the intentions in his move to raise the fee and have this loan scheme?

Dr Tony Tan Keng Yam: Mr Speaker, Sir, the Member for Moulmein is absolutely right. It is important to impress on our University students that they are a very privileged lot and that their very expensive education has been very heavily subsidized by the Government at the expense of other taxpayers. As I have said in my statement, Sir, University students when they graduate can aspire to be members of very highly paid professions. And it is only fair that, after they have had the benefit of a University education subsidized by the Government, they should pay back part of the subsidy after they have graduated. In this case, I think that one good result out of this increase of university fees is that we will have a very responsible student population at NUS and at NTI.

Dr Tan Cheng Bock: Questions for the Minister. Is there any particular reason why the polytechnics are exempted from this exercise? The other question is: this exercise will help the University to recover 12% of the operating cost, an improvement of 4% compared to the 8% of what is recovered. Will the cost of administrative machinery set up to manage this $100 million fund eat into a large portion of the 4% saved as a result of this? In other words, is it worth it?

Dr Tony Tan Keng Yam: Sir, I will first respond to the question raised by the Member for Ayer Rajah regarding the polytechnics.

Sir, fixing tuition fees at a certain percentage of the recurrent cost per student studying in the various courses is a new principle which has not hitherto been applied in Singapore. Like all innovations affecting our educational institutions, I am inclined to take a cautious approach and confine the application of this new principle to the NUS and to the NTI, at least for the next few years until the system settles down and any transitional difficulties have been resolved.

With regard to the polytechnics, I note that the polytechnics' three-year diploma courses are designed mainly for an intake consisting of '0' level students. About 90% of the intake of the polytechnics are '0' level students. The polytechnics draw their students essentially from the same pool of '0' level students as the pre-university centres and the junior colleges. And each year the polytechnics participate in the Ministry of Education joint admission exercise together with the pre-unviersity centres and the junior colleges. The role of the polytechnics is to produce technicians and middle-level personnel for our economy. As institutions of post-secondary education, the polytechnics are mid-way between the NUS and the NTI and the pre-university centres and junior colleges. The operating cost per student, which is about $6,000 at the polytechnics, is more than double the operating cost per student, about $2,700, in our junior colleges but it is much lower than the operating cost per student, about $14,400 as I have just mentioned, at NUS and NTI. Presently the Government subsidizes about 83% of the operating cost for each student at our polytechnics. With better starting ratios and a greater variety of courses, it is not possible to keep polytechnic tuition fees at an unchanged level.

But, Sir, with stringent cost control at the two polytechnics, I am of the view that the polytechnics should hold down any increase in fees to a much lower level than the average increase of 20% per annum which was the case for the last three years, 1984/85, 1985/86, 1986/87.

There was one other question on the administrative cost. Sir, the University will be discussing with a number of banks as to whether they can help the University to administer this particular loan scheme. We will try and keep the cost as low as possible. I think the net result is that it will be worth the exercise.

Mr Tan Soo Khoon: Mr Speaker, Sir, interest rates as we know fluctuate, and while it is low, I think nobody will complain. But interest rates can go up to 8%, 9%, 10%, even double digit figures. Would the Minister not consider lessening the burden on the students by fixing the interest rate at a special low rate, instead of pegging it to the commercial interest rate? I am sure he will agree with me that Government's objective is not to make more money out of the money that it lends to its students.

Dr Tony Tan Keng Yam: Sir, it is because interest rates fluctuate that we are fixing the interest rate on the loan to the prime rate. We have seen the consequences of having fixed rates and the complications that always arise, whether it is for housing loan or for any type of loan. You are in a no-win situation. Whatever rate you fix, if the commercial rate goes up, then of course the students are quite happy but then the rate will rapidly go out of line. If the commercial rate is lower than your fixed rate, then there would be a tremendous clamour and great accusations of unfairness to the Government. I think, Sir, that we have paid a very heavy price to learn this and we have changed the various rates for Government loans to fluctuation rate tied to the prime rate. I believe that this is very fair and, in fact, it is unusual for anybody to be able to get a small loan from a bank, as the Member will know, at prime rate. Fixing the interest rate on the loans at the average of the prime rates charged by the Big Four local banks is already, in my view, a very large concession from the Minister for Finance.

Mr Tan Soo Khoon: Sir, I think the Minister has missed my point. What I meant was an interest rate which is very low and very special, lower than what the prime rate will ever fall.

Dr Tony Tan Keng Yam: Sir, I think that question should properly be directed to the Minister for Finance. I would not advise him to do so.

Mr Speaker: Mr Chiam, if you will ask your Question No. 1, the Prime Minister will answer it now.