Issue bank loans to more poor students
( 2001-10-29 10:27 ) (1 )

In this Autumn semester, more than 1,000 freshman at Peking University, or one-third of the newly enrolled, received national education aid loans.

They are the lucky few among tens of thousands of students who need financial aid to continue with their education because their parents cannot afford it. A year at big-city universities costs a student 5,000 yuan (US$602) in tuition and at least 3,000 yuan (US$361) in daily living expenses.

But the average dispensable income of city dwellers last year was only 6,280 yuan (US$756) per capita, not to mention rural residents' net income of 2,253 yuan (US$271) per capita.

According to the most recent figures, more than 25 per cent of the total 7 million college and university students today are from low-income families that cannot afford the cost of higher education.

In sharp contrast to the happy stories of poor students who acquired loans to attend celebrated universities such as Peking University, those at less renowned schools, especially those in the hinterlands, found it difficult to get education loans.

Among 21,600 students who applied for State education loans in Shaanxi Province, fewer than 3 per cent have actually obtained the money so far.

Since commercial banks say these students have little prospect of landing a decent job and getting a salary adequate to repay their debt, they decline to lend money.

In the absence of a comprehensive credit rating system in China, there is no credit history of individuals.

To some extent, it is understandable that banks, in an effort to reduce risks, are more likely to extend credit to students with good academic records at good universities.

Instances in which students' dodged payment after graduation also makes the banks' reluctance to lend understandable.

But the fact remains that the repayment term stipulated by the banks is too short for students. In most cases they have to clear their debt in about five years, compared with a repayment span as long as 15 years in developed countries.

As a result, the credit approval criteria is too high for most applicants, and the possibility of default increases.

And no matter how justified the commercial banks are in not granting loans to students, education loans to university students should be valued as something more than a risky, less cost-effective and lucrative credit.

The benefits of education will last a student's lifetime, so the benefit to society is huge.

Moreover, if the banks are far-sighted enough, they should recognize the huge potential return of education loans. After students graduate, most of them will enter the upper-middle income group. They will likely obtain an auto loan and mortgage, which will bring low-risk and high-quality credit business to banks. Therefore, lending to students when they are in dire need of money will foster customer loyalty.

To tap this huge potential customer base, the banks should diversify their current portfolio of education loans and offer some long-term credit to students.

Considering that some students cannot get a job immediately after graduation and their income may vary, the banks should provide more repayment options and flexible repayment plans.

And to help more students get loans in time, the application procedures should be made easier.

Despite the difficulties in getting education loans, the government, to its credit, has introduced policies guaranteeing that no single student will leave the college due to poverty. All the universities have provided measures such as financial aid and scholarships.

Yet as the number of students applying for credit loans increase year by year, only the sound implementation of education loans will enable more students to be financially prepared for college.

(FENG QIHUA)