OREANDA-NEWS. August 22, 2013. The reporter saw Luo Yang, a student who had just been admitted into Jilin University, applying for a student loan at the Student Support Center of Liaoyuan City in Jilin. He told the reporter that he was applying for the loan at the recommendation of his sister, who graduated from college this year. His sister said that, thanks to her student loan, she not only completed her studies but also found a job, and that the loan had taught her how to establish a good personal credit history, and that is lifetime wealth for her.

The reporter has learned that the "2013 Job Fair for College Graduates Receiving China Development Bank Student Loans" was held at Changchun University of Technology on 15 December 2012. The job fair brought more than 200 enterprises in the province representing several industries, along with more than 4,000 employment positions for the students. Over 11,500 graduating students from 23 provincial colleges in Changchun who received student loans applied for the jobs. The job signup rate exceeded 20% on the day of the job fair, and more than 1,000 people reached employment agreements. Luo's sister also found a job at the job fair.

According to Zhao Chunhui, head of the Third Customer Department of CDB Jilin Branch, students who applied for student loans are all needy students, who will immediately face repayment pressure if they fail to find jobs upon graduation. CDB offers full service to student loan recipients -- the bank will keep a close watch on their employment prospects as well as their repayment information.

Credibility is the key to the student loan business. In Jilin, it has become the consensus of student loan applicants that they should understand well before receiving a loan and keep their repayment promises after receiving it.

It has been said that, due to the difficulty, costs, and high default risks, commercial banks tend to lack interest in the student loan business. Jilin's student loan tender even failed to find bidders in 2006. Under such circumstances, CDB took the initiative to take up this work, which benefits the nation and the people but is also difficult.

Through research they learned that, since the government provides a 14% risk subsidy to commercial banks offering student loans, colleges are thus no longer involved in the management of student loan recipients, making students loans a matter just between the students and the banks. This has led to an increase in bank management costs while loan recipients often lack credibility and go into serious default. Some backs have even asked for a 30% risk subsidy as a condition for offering student loans.

To solve this issue requires offering full service to student loan recipients. For this reason, Jilin set up a tripartite accountability mechanism involving the colleges, CDB, and the loan office: if the default rate at a school exceeds 15% but no more than 20%, the three sides jointly assume responsibility for the default compensation for the portion exceeding 15% in the ratio of 5:4:1; but if the default rate exceeds 20%, the portion of the compensation above 20% will be entirely borne by the college. This way, the colleges will have great incentive in participating in the management of loan recipients.

In addition, Jilin also set up a co-borrower mechanism involving students and their parents. The information sharing mechanism involving the support center, colleges, and employers links up parents, colleges, employers, and other credit stakeholders to form a chain of risk prevention.

"We do a good job of the student loan business to allow needy students to go to college with the aid of student loans, and importantly to allow them to establish an awareness of modern finance and a personal credit system," said Zhao. "In order to ensure timely repayments, CDB has set up a credit repayment system, linked the student loan information management system with the personal credit system of the People's Bank of China, the household registration system of the Ministry of Public Security, and the matriculation management system of the Ministry of Education, developed a student loan management information system and a student loan online application system, and achieved electronic management from loan application to loan recovery, whereby students can conveniently apply online for loans from their hometowns and colleges and can make online repayments anywhere in the country. CDB has also boldly introduced Alipay as a third-party payment system to improve the efficiency in loan disbursement and recovery."

At the same time as offering full service in student loans, Jilin has also made efforts to ensure full coverage of student loans. Prior to 2012, lending was based on student's home base, i.e. all Jilin students, whether studying in or outside Jilin, could apply for student loans of up to 6,000 yuan per school year with a term of up to 14 years as well as government allowance during enrollment. Starting from 2012, Jilin implemented leaning based on school base to make it possible for students from outside Jilin who study in the province to apply for student loans.

Up to now, CDB Jilin Branch has issued total student loans of 872 million yuan with a balance of 571 million yuan, and issued home-based student loans of 130 million yuan with a balance of 130 million yuan. The loans, covering 10 cities (prefectures) and 54 counties (districts) across the province, have met the most urgent needs of more than 100,000 students who faced obstacles in going to college due to family financial problems.