The Long-Awaited Clampdown on Rampant Student Lending
A long-awaited document detailing the regulation of online student loans has been released by the Ministry of Education, together with the China Banking Regulatory Commission.
The official document, succinctly titled “Announcement Regarding Educational Guidance and the Strengthening of Defense Against Malicious Online Lending in Schools,” had been circulated internally as early as April 15 to local governments and select universities under the direct jurisdiction of the Ministry of Education. However, the existence of the regulation was only made public recently by media coverage, the earliest of which being a Wednesday report by financial services website Rong360.
A spokesperson for the Ministry of Education told Sixth Tone that it did not know how the media learned of the regulations, but confirmed that the document would be posted on its official website next week.
The regulations have emerged following increasing public scrutiny surrounding private student loan companies, which prey on cash-strapped university students with the promise of immediate — and often large — loans. The sky-high interest rates have had devastating effects, including the recent suicide of a college student who had racked up 580,000 yuan (around $90,000) in debt.
The new regulations require both local government financial departments and universities to establish an active monitoring system of student loan platforms. It also urges universities to “guide students in the establishment of civilized consumer outlooks,” suggesting that a consumerist culture is in part to blame for the rising appeal of student loans.
Further, the document encourages universities to work closer with finance institutions to expand students’ alternatives for capital support, including “exploring building and developing campus community banks.”
The new regulations follow recent government efforts to clamp down on peer-to-peer online lending platforms. Fourteen Chinese central departments, including the People’s Bank of China, the Supreme People’s Court, and the Ministry of Public Security said on April 27 that tougher measures ought to be taken on illegal fund-raising.
In a statement released April 28 by popular student loans platform Uni-lending, the company said it welcomed the new regulations. “The announcement of this regulation is a substantive step in the reasonable management of online lending on university campuses,” the statement said, “and it is something that Uni-lending has been calling for for some time.”
Jin Kelou, a spokesman for Uni-lending, told Sixth Tone that he believed the new regulations would have little impact on the company’s practices, suggesting that the regulations were not as stringent as their language suggested. “This isn’t a prohibitive document,” he said. “It’s along the lines of industry guidelines.”
News of the regulations has been met with mixed reactions from net users on China’s social media platforms. One user applauded the move, saying that student loans “have always existed on the peripheries of the law” and that “there hasn’t been enough regulation.” Others were less enthusiastic, with one user saying: “If there is demand, then there is no way you can stop it. At most, you can kick them off campus, but they’ll still be able to function.”
(Header image: IC)