The government should try to reduce risk in the student loans system, says an article in Beijing Youth Daily. An excerpt follows:

The Changping branch of the Construction Bank of China recently took 23 university students to court, in an attempt to claw back the loans they had been granted.

It is the first time a student loan dispute has been presented to a court for settlement.

There have been complaints from banks about the risks inherent in the student loan system since it was adopted in 2001.

But according to relevant departments, more than 20 percent of indebted students have defaulted on loan repayments to banks.

To avoid losses, some commercial banks have even stopped granting loans to students.

The possible demise of the student loan business will not only retard the development of higher education, but also be unfavourable to the country's aim to ensure equal education opportunities for impoverished children.

On the one hand, a risk guarantee system has not been established. Also, the country's personal credit mechanism is yet to be set up.

In 2004, the government laid out a new student loan policy. But it has neither changed the fact that commercial banks provide loans nor come up with concrete and effective ways to settle outstanding debts. The policy does not specify the role of universities.

Commercial banks' enthusiasm for providing the service has been on the decline.

The adoption of the student loan system demonstrated the country's intention to promote equal education for all students and its efforts to aid the most disadvantaged applicants.

Smooth operation of the student loans system will help in the drive to construct a harmonious society. The government should set up a more flexible loan repayment model and introduce policies that reduce the risks banks have to run.

(China Daily December 30, 2005)