Few Students In China Default On Study Loans

By Ng Che Yean BEIJING (China), May 2 (Bernama) -- When Guo Yuyu, a student of Xi'an Foreign Language University, heard about a government-subsidised study loan from her high school teacher, she applied immediately for the loan online. The borrower of the Student-origin-based Loan Scheme said it would help to relieve the financial burden of her parents and help address the cost of living for a semester. For Li Qin, a Shanghai East China Normal University graduate, the Campus-based Study Loan she secured helped her to complete her university studies without having to depend on her parents. "The reason why I applied for a study loan is that I wanted to be independent. And I've never spent my parents' money since the second semester in college. "The loan reminds me to be independent. And I strived to save money that I earned to pay off the loan as soon as possible after I graduated. This is because the longer I take to settle the loan, the more interest I have to pay," said Li, who paid off her study loan one year after graduation. Li comes from a rural area in Hubei Province and, like most Shanghai university students who apply for government study loans, she is one of the non-local students from low-income families. Guo and Li are just two examples of China’s students who know the value of higher education and the responsibility that comes with student loans. Once they have been successful in the highly-competitive entrance exams to get into tertiary educational institutions, they go all-out to ensure that they stay the course and graduate, knowing that they would have a better life upon graduation. Even if it means having to get a study loan and paying off the debt after they graduate. The Chinese government is committed to ensuring that all qualified students, especially those from low-income families, complete their higher education, said Zhang Guangming, Director of the China National Centre for Students Assistance Administration under the Ministry of Education. It may seem a challenging task for the government to achieve such a goal in a big country such as China with a population of 1.3 billion. There are about 22 million university students in China and 25 per cent of them come from very poor families. Zhang said the government had put in much effort to help poor students with financial aid like merit scholarships, subsidies, grants and government-subsidised study loans to ensure that none of them is left behind. "We only offer government-subsidised study loans to poverty-stricken students while non-poverty-stricken students have to apply for mortgage loans from commercial banks if they need study loans. "Our public universities’ standard tuition fees are affordable for middle-income families as the minimum amount is US$ 476.58 (3,000 yuan) in many universities and about 5,000 yuan or 6,000 yuan in the universities in big cities," Zhang said. Each student can borrow up to 6,000 yuan per year and the government would help them to pay the interest during the four-year term in college. The borrowers start to repay the loan and interest after graduation. They have to pay off loans within 10 years. However, they can apply for deferment twice if they have yet to be employed two years after graduation. There are two main types of government-subsidised study loans – the Student-origin-based Study Loan, which is run by local education authorities and authorised banks where the students come from and the Campus-based Study Loan, which is run by the school campus and authorised banks. As for students who delay repaying the loans or refuse to repay or advocate that higher education should be free, Zhang has this to say: "It is wrong. Don't take things for granted as higher education is not compulsory education. The students who obtain study loans should learn to be responsible and should pay off their loans on time." However, he said, non-payment rarely happened in China as the government-subsidised study loans run by banks had been efficient in collecting repayments. He said borrowers would want to avoid the risk from being blacklisted by banks or face bankruptcy. To encourage financial institutions to offer study loans, a risk compensation fund had been set up to compensate them from potential loss. The government also worked with banks to provide college students with credit and finance information to prevent credit abuse and to nurture their responsibility towards society, said Zhang. Zhai Guowei, a member of the Beijing Municipal Education Working Committee, said the demand for government-subsidised study loans was relatively low in Beijing due to higher incomes and more comprehensive social protection schemes in the capital city. In 2011, only 695 students borrowed from the Student-origin-based Study Loan in Beijing. --BERNAMA