The People's Bank of China, the country's central bank, has
urged all banks nationwide to expand education loans to college
students from needy families, according to a notice on its website
on Sunday.
All financial institutions should provide education loans in
time and in full and create new kinds of credit products to meet
the need of poor students, the central bank said in the notice.
"The current educational loan system still needs further
improvement as the loans do not cover all students of higher
educational institutions and the application procedures are rather
complicated," said the bank.
However, the central bank warned all banking institutions to
improve internal control and strengthen monitoring on loan
management to lower risks.
China introduced a pilot state education loan system in eight
major cities, including Beijing, Shanghai and Tianjin in 1999 to
assist poor college students. The service was extended to the rest
of the country in 2004. By the end of June, education loans balance
had reached 19.3 billion yuan (US$2.55 billion), according to
figures from the central bank.
"The risk of an education loan is much higher than that of a
commercial one," said an official from the Bank of China.
According to policies, the state student loan system requires no
guarantee and offers a lenient time limitation, six years at most,
for students to pay back the loan after graduation, both of which
may increase the risks for the banks.
As students can apply for loans without guarantee, banks can
only rely on the students' personal credit. No tangible mortgage
can assure the banks that the students will honour the
contract.
Although banks have set up an information system to record the
education loan receivers, it cannot track students' personal
information after they graduate from college.
"We have found that many universities and colleges have several
million yuan of defaulted tuition fees, some have nearly a
billion," Cui Bangyan, a senior official with the Ministry of
Education said at a press conference early this month.
Figures from the ministry show that 2.07 million students in
China had received a total of 17.27 billion yuan of loans by the
end of 2005, but almost one in five violated the loan contract,
including the default on loan. The defaulted loans totaled more
than 3 billion yuan.
Recently, the Beijing and Guangdong branches of the Industrial
and Commercial Bank of China blacklisted more than 1,700 students
defaulting on loan payment for more than one year. Detailed
information of the students, including their names, ID numbers, and
addresses, were all publicized on the Internet.
The blacklist is legitimate under the policies on the student
loan, which is jointly issued by the People's Bank of China, the
Ministry of Education and the Ministry of Finance, but Qiu
Baochang, member of the Beijing Lawyer's Association, suggested
that submitting the disputes to law would be a better choice than
putting the blacklist on the Internet, because banks might face
lawsuits if the blacklist contained wrong information.
As Qiu concerned, some students do have difficulties in repaying
the loan in time and therefore should be offered more
tolerance.
"My monthly salary and allowance for overtime working are only
1,200 yuan and I can only spare 500 yuan each month," the Southern
Metropolitan News quoted one of the blacklisted students as
saying.
"If possible, I would rather repay my debt with the graduation
certificate that cost me four year's college study plus 50,000 yuan
of tuition fees."
The government policy offers discount on the student loans, yet
the financial discount fail to compensate the loss of banks.
"The government could learn from foreign peers," said Wei Xin, a
professor with the Peking University. "Aside from providing
discount, some foreign governments also pay the debt to banks to
ease the students' burden so that the student loan services could
go further."
"The government should be more accountable for the risk of the
student loan services, after all the government shoulders the
responsibility for educational investment, not the banks," Wei
said.
(Xinhua News Agency July 30, 2007)