Guarantees from both local and central governments are important
to the healthy operation of student loan system, says a signed
article in Yanzhao Metropolis Daily. An excerpt
follows:
It was revealed recently that about 80 million yuan (US$10
million) of the planned 200 million yuan (US$25 million) in student
loans for last school year have not been granted in Yunnan
Province. That means about 20,000 students have not received timely
assistance.
State student loans are the presentation of social funding for
equal opportunities of higher education. But the ungranted 80
million yuan in loans show that there are defects in the loan
system. In fact, this is just a microcosm of the current plight the
system faces.
Higher education institutions and banks are facing a plight
between responsibility and risk. Schools may meet difficulty if
they shoulder too much moral responsibility and ignore financial
risks. It will also burden banks. Since about 20 percent of college
graduates break their loan contracts in Yunnan, banks hold up
issuing more loans.
Actually, the government should shoulder more responsibilities
in this regard to solve the problem.
There is an imbalance between the interest distribution and cost
of state student loans. As a public product, state student loans
have strong policy effects. Their effective implementation would
contribute to social stability and harmony. Otherwise it will cause
inequality of opportunities in higher education, which will affect
harmonious social development.
So far, a risk compensation mechanism is in place to ensure the
interest of banks. Schools and local governments will pay for the
compensation. As the financial situation for schools is normally
not so optimistic, they find it difficult to pay the
compensation.
Regional governments' financial abilities vary. Some of them,
especially those in western regions, can hardly support the
discount student loans. As the credit system has not been
established yet, banks are not willing to issue non-guarantee
student loans.
Our central and provincial governments should shoulder more
responsibilities in financing poor students. The provincial
government can provide guarantees and the central government can
re-guarantee bad loans for students. If the loans are not paid by
students, the government should give banks subsidies in the full
amount to ensure that the banks can continue issuing students
loans. This is the only way to reverse the imbalance of interest
and cost and ensure a smooth development of student loans.
(China Daily August 31, 2006)