Loans are dou­ble-edged sword for col­lege stu­dents

China Daily (Canada) - - BUSINESS - By XIN­HUA

Zheng Dex­ing died on March 9. The col­lege stu­dent fromHe­nan prov­ince com­mit­ted sui­cide af­ter ac­cu­mu­lat­ing loans worth 589,500 yuan ($91,000) to pay for his gam­bling ad­dic­tion.

Yang Bo, a ju­nior in South­west China’s Guizhou Nor­mal Univer­sity, wanted to go on va­ca­tion to Guang­dong prov­ince, so he re­sorted to a loan of 5,000 yuan.

“The loan makes it a lot eas­ier to travel,” Yang said. “I just pay 500 yuan or so monthly to pay it back.”

More and more col­lege stu­dents are turn­ing to loans to sup­ple­ment their lifestyles. To ap­ply, stu­dents must dis­close cer­tain in­for­ma­tion about them­selves and their par­ents for the loan to be ver­i­fied.

Should a monthly re­pay­ment be missed or late, the in­ter­est rate is in­creased.

“It took me less than an hour to com­plete the ap­pli­ca­tion on­line,” said Zhang Zem­ing, a fresh­man from east­ern China’s Fu­jian prov­ince. “For newap­pli­cants, the loan is in­ter­est free.”

Stu­dents from more than 50 uni­ver­si­ties were sur­veyed by Cap­i­tal Cam­pus Press Union in Jan­uary, of the re­spon­dents, 63 per­cent have ap­plied for loans on­line, 85 per­cent of which did not want their par­ents to be in­volved.

“It feels awk­ward for me to ask my par­ents for that much money be­cause I ama stu­dent,” ad­mit­ted Zhang, who ap­plied for a loan to buy a lap­top com­puter.

Apart from travel and shop­ping, loans have also been used to start or in­vest in busi­nesses. LiHailang, a col­lege stu­dent from the Ningxia Hui au­ton­o­mous re­gion, used his loan to open a restau­rant near his school.

“On­line loans can stim­u­late con­sump­tion,” said Li Yuan­sheng, an eco­nom­ics pro­fes­sor at Fu­jian Nor­mal Univer­sity. “Col­lege stu­dents tend to spend more on dig­i­tal de­vices, but lack the spare funds, this is where loans can help.”

Also, from a lender’s per­spec­tive, col­lege stu­dents are a huge mar­ket, with a pref­er­ence for short-term pur­chases, ac­cord­ing to Kang Jun, a pro­fes­sor atHu­nan Univer­sity.

How­ever, loans are not all about ben­e­fits: Take the sad story of Zheng Dex­ing. He was just one of a num­ber of stu­dents who rely on loans to live be­yond their means.

In some cases, stu­dents are bor­row­ing more money to re­pay out­stand­ing loans, re­sult­ing in in­creased com­pound in­ter­est.

This was the case for Lin Lin, who bought an iPhone 6s with an in­stall­ment loan and has 4,000 yuan yet to re­pay, putting a huge strain on her weekly bud­get.

“Col­lege stu­dents are a spe­cial group,” said Fu Jian, a lawyer from He­nan prov­ince. “They are im­ma­ture when it comes to money man­age­ment and bud­get­ing.”

Li Yuan­sheng, the pro­fes­sor from Fu­jian, con­curred. “They need to un­der­stand that loans should only be used for smaller pur­chases, or else they will strug­gle.”

As for the web­sites that of­fer these loans, there are calls that the terms and con­di­tions should be made clearer.

“The web­sites should be more aware of their so­cial re­spon­si­bil­ity, rather than en­cour­ag­ing ir­ra­tional spend­ing,” Kang Jun sug­gested, re­fer­ring to the fact that the plat­forms have made it too easy for stu­dents to regis­ter and get money.

“They should also con­sider ex­pand­ing their in­ter­est rates based on the cus­tomers they tar­get, es­pe­cially col­lege stu­dents,” he added.

In ad­di­tion, uni­ver­si­ties and par­ents have been en­cour­aged to teach stu­dents bet­ter spend­ing habits.

“At the end of the day, par­ents should talk with their chil­dren and pre­vent un­nec­es­sary loans from hap­pen­ing,” Fu Jian stressed.

“What stu­dents truly rely on are their fam­i­lies and schools, not loans.”

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