Born in a poor family in a small village of Liuyang, Hunan Province, Li and his family had no enough money to pay his tuition and accommodation fees for his four years of study at university. But Li said he was counting on getting a student loan from the bank when he registered four years ago, with 6,000 yuan (US$722), almost all the money his family could borrow.

However, Li found it very difficult to apply for loan from the bank to cover his tuition, accommodation and living expenses, since there were always too many applicants and some student borrowers' previous repayment defaults made the bank more rigid in approving new loans.

After repetitive applications, Li was granted just 4,000 yuan (US$481) from the student loan program in 2002.

The money could barely sustain him for one year. Hence, Li ended up with a huge debt to the university for tuition and accommodations, totaling 11,100 yuan (US$1,337).

Last month, Li felt that he was struck good fortune when he was finally offered a job by the Guangdong-based Midea Holding Co Ltd upon graduation. "For me, obtaining the job will ensure getting rid of poverty and repaying the university debt and the student loan,'' said Li.

However, the excitement did not last long since he could not obtain the essential certificates necessary to complete an employment contract, including graduation and degree certificates and assignment documents due to his failure to pay off his debts to the university.

Since the certificates are a must for the employer to recognize his academic credentials from the university, Li felt the dream of employment would just flicker and die out. And the lack of assignment document from the university made it impossible to apply for a residency card at the local public security department.

"It would be hard for me to repay the money to the university right after graduation,'' said Li.

Li was not alone.

Eight other classmates who owed tuition to the university were also rejected after all the essential documents to facilitate their employment could not be produced. In total, it is estimated that no less than 500 graduating students from the university failed to obtain certificates this year due to failure to pay off the tuition fees to the university, sources within the institution said.

"It is illogical that the university did not issue the certificates for us after graduation, since without the certificates we would not be able to get jobs. Only when we have jobs can we repay the owed tuition fees and accommodation expenses,'' Li added.

However, Zhou Mengjun, an official at Hunan University, said in an interview with Guangzhou-based Nanfang Weekend that it is the only way at present to deal with students' debts to the university.

"Tuition owed by students to the university have become a big financial burden to us since more and more graduates fail to repay the university,'' said Zhou.

According to Zhou, tuition still owned by graduates to the university totaled more than 5 million yuan (US$604,500) this year.

A universal problem

What happened on the campus of the Hunan University is neither incidental nor accidental, with thousands of college students facing the same situation whey they graduate from the universities. Huang, an official of the graduates' employment office in Guangdong University of Foreign Studies, told China Daily that there were also graduates rejected because they could not get certificates from his university.

"As far as I know, the university has not granted graduation and degree certificates to some students who haven't paid for tuition and accommodation to the university,'' said Huang. "Those who haven't paid back student loans by specified times are also rejected."

Chen Zhe, an official in charge of college students' loans at the university, confirmed that the university has held back graduation and degree certificates to nearly 180 graduate students this year. Some owed tuition and accommodation fees to the university. Others failed to pay back student loans to their banks by the required times.

According to the current student loan programs, a repayment agreement must be signed by the student borrower, the bank and the university, to ensure timely repayments after graduation.

"For those who had difficulties in abiding by the repayment agreements, their graduation and degree certificates are kept by the bank. Once the students repay the loaned fees to the bank, the certificates will be returned to them,'' Chen told China Daily.

"The graduates whose certificates are arrested are allowed to have the graduation and degree certificates copied once their work units allow it,'' said Chen. In addition, Chen said if the students' work units are willing to issue the assurance agreements stating the terms, such as the repayment time and amount of the loaned tuition fees and living expenses, they are able to get back the certificates.

The students' loan program was first introduced to help poor youth realize their higher education dream in 1999. However, the program was seriously strained in recent years by repayment defaults.

According to Zhu Junwen, director of the Loans Administration Centre for College Students under the Guangdong Bureau of Education, over 23,000 students from 64 colleges and institutes in the province have applied for loans since the loan program was launched five years ago. To date, the amount of contracted loans in the province totaled about 310 million yuan (US$37.5 million) and the actually used amount reached over 210 million yuan (US$25.4 million), according to the center's statistics.

However, it is reported that a number of student borrowers failed to abide by their repayment agreement. In some places, the default rate can be as high as 20 percent.

Although the banks vowed not to cancel the loan program they are justified to reduce their confidence in student borrowers. Insiders of the banks said that the number of students who do not abide by the repayment agreement is expected to increase in the next two years since more such student borrowers have graduated.

A joint effort has been initiated in July by the Ministry of Education, the Ministry of Finance, the People's Bank of China and the China Banking Regulatory Committee to revive the nation's student loan program.

A major change to the student loan policy is that the repayment term is extended from the previous four years to six years since graduation.

The previous four-year repayment term constituted a heavy burden on most borrowers. The country's tough job market has darkened college graduates' employment prospects. It is estimated that some 2.8 million students, an increase of nearly one-third over the last year, graduated from college this summer.

By extending the term of repayment to six years and requiring colleges to set up loan compensation funds, the new credit policy will allow college graduates to establish a credit rating within their financial capacity while enhancing educational institutions' role in overseeing repayments.

(China Daily August 10, 2004)