Student loans provided by unauthorized institutions have been suspended by the China Banking Regulatory Commission, the Ministry of Education and the Ministry of Human Resources and Social Security, according to a joint announcement on June 18.
The three government organs issued a notice requesting that all online lenders suspend their issuance of student loans. In addition, commercial banks and policy banks are advised to develop financial products such as student loans for study, training and consumption only when the potential risks can be controlled.
"Student loan" refers to a financial product targeted at students, with the purpose of funding academic studies or entrepreneurial ventures. However, some products go too far, advertising that students can easily get loans so long as they fill in certain information online, pass the verification screening and pay a service fee.
According to a survey by the Research Center of Credit Management of Renmin University, 8.77 percent of 50,000 students surveyed from 252 universities were willing to consider loans when short of money. Providing financial services to university students has become one of the fastest-growing P2P financial services.
However, another survey showed that university students have very limited knowledge about the financial and legal risks of such loans. Among the sample of 23,939 college students, 37 percent knew nothing about the related risks; 26 percent knew a little, 22 percent knew some, and only 15 percent were very familiar with the potential risks
Such a knowledge gap inevitably leads to tragedies. The death of a student surnamed Zheng at Henan University of Animal Husbandry and Economy offers a harrowing case in point. Zheng borrowed hundreds of thousands of RMB from an online lender in the names of his classmates. Unaware of their "loans," his classmates were eventually confronted by the lender. Zheng, unable to pay back the debt, was driven to suicide.
Zeng Gang, a scholar of finances at the Chinese Academy of Social Sciences, said that unlike adults, most college students have not yet formed a proper understanding of finance and consumption. They are easily persuaded to borrow money, and policies should be introduced to protect the vulnerable group.
