ABSTRACT
In 2000, the Chinese government implemented its student loan scheme throughout all tertiary institutions in China. Unlike commercial bank loans (secured loans taken from commercial banks by individuals), eligibility for the above scheme is restricted to the families of students who are facing financial difficulties. Fifty per cent of the loan interest will be subsidized by the government, while the other 50 per cent will only have to be repaid annually after graduation. This policy indicated an increased government emphasis on the welfare of the lower income strata of the population, and has been very popular with the people. However, for the past 2 years since the scheme was implemented,
results have been dismal. The Ministry of Education classifies students with a family income of less than 200 yuan a month as facing ‘financial hardship’, while students with a family income of less than RMB 120 a month are classified as facing ‘extreme financial hardship’. According to Ministry projections, 30 per cent of all tertiary education students nationwide fall under the first category, while 15 per cent of the students are classified as facing ‘extreme financial hardship’. This works out at an astronomical sum of 10 billion yuan of student loans annually. Figures from the China National Centre for Student Assistance indicate that, as of December 2001, student loan agreements between tertiary education institutions and banks amounted to 2.43 billion, a mere 35.4 per cent of the total student loans that had been applied for. Only 272,000 students, or 31.7 per cent of the total number of applicants, have successfully signed contracts for student loans. In addition, although the government has set aside 266 million yuan in subsidies for the loan interest, only 13.95 million yuan of actual subsidies (5.24 per cent of the total amount) have been distributed. On one hand, the government faced problems with distributing the sub-
sidies, while on the other hand, 70 per cent of families who were facing financial difficulties were unable to apply for student loans. It begs the question why this well-intentioned and initially well-received scheme is in its current state.
