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Student Loans: A Study Of Its Operational Mechanism And Credit Risk Management

Posted on:2008-06-06Degree:DoctorType:Dissertation
Country:ChinaCandidate:C P ChenFull Text:PDF
GTID:1117360242958580Subject:Political economy
Abstract/Summary:PDF Full Text Request
At the transition from elite education to mass education in P.R. China, the investment in higher education by the government is quite inadequate. To relieve the insufficiency of funds, the government made a significant reform in the financial system of higher education, that is, to carry out the charging system. However, China is still a developing country with many low income households. Moreover, the development is quite unbalanced, resulting in income differences between areas and between households. Therefore, many students who receive higher education and their families cannot afford the high tuition fee. To guarantee equality of education, realize social benefits, and compensate for the insufficiency of education resource allocation, in China emerged student loans, which are popular abroad. At present, student loans in our country are factually a type of non-guaranteed commercial bank credit loan, and such loan system compelled by the government is largely different from the standards of general commercial bank loans. Meanwhile, the governmental departments concerned, the commercial banks and the students and their families don't have a good knowledge of and have not been well prepared for such loans due to the short period of conducting such loans. Since 1999, there has been slow progress in student loans, especially the phenomenon of default of loan repayment has been universal during payback period of loans. As a result, the commercial banks are faced with great risk of recovery, and further the phenomenon of credit stinting has occurred among the commercial banks. Thus, how to reform the operational mechanism of student loans and strengthen the loan risk management of commercial banks so as to promote the development of student loans remains an urgent task for solving the difficulty in going to college as well as a key factor in the healthy and benign operation of student loans.After a review of experience of theory research and practice about student loans both home and abroad and based on the research already conducted, this dissertation makes a further study of the operational mechanism of student loans in our country and makes the author's own contribution to the theory and practice about the improvement and effective implementation of student loans.Firstly, the theoretical basis for student loans is expounded based on the predecessors' theoretical research. The human capital theory, screening theory, theory of equal education, cost sharing theory in higher education are all reviewed, and these theories serve as grounds from different angles for the study of necessity and significance of student loans. Furthermore, a new point of view—public economics is examined for theoretical basis, which is important for the sustainable and highly efficient operation of student loans. Particularly cost sharing mechanism in higher education cannot do without student loans, which should be combined with tuition fee of higher education to create a mutual balance.Secondly, up to now, student loans have gone through half a century and in many countries or regions have produced benign results, while in other countries or regions the results are not so good as expected and they are even in dilemma. This dissertation makes a comparative study, analyzing and summarizing the international experience and lessons of student loans, which are instructive for our country's loan system that was developed not long ago and still needs to be improved. In the author's opinion, the following points should be noted concerning student loans of higher education: (1) the economic development level in a country or region is of paramount importance to the choice of loan schemes; (2) the government should subsidize and guarantee student loans;(3) multi-mode and pertinent loan scheme is an important approach to the expansion of student loans in a country or region, and the specific loan scheme should fit in with the situation of country; (4) repayment mechanism should take the student's ability to repay into consideration, and design diversified repayment modes, and the yearly amount repaid should be limited to a certain extent, (5) consummate taxation administration system and personal information management system should be established.Thirdly, formally carried out in 1999, student loans in our country shared the same background with some other countries or regions, but also possessed their own characteristics. They had a short history and didn't develop smoothly. To begin with the background and history of student loans in our country, a comprehensive analysis of the practice of student loans is conducted, and further the status quo and the major problems are analyzed and discussed, thus forming the basis for a further study of operational mechanism of student loans as well as the credit risk management of commercial banks in our country.Fourthly, on the basis of the above research, the method of "analysis and construction of key elements" is employed to study the operational mechanism, including prospective borrowers, cost sharing of higher education and repayment modes. Since the prospective borrowers are usually the needy students in our country, in this dissertation an evaluation system is suggested to confirm those needy students, and at the same time the working procedures and principles are also put forward. As for cost sharing of higher education, the author first takes the following three principles into account: (1) comparatively consummate mode of cost confirmation; (2) cost-benefit principle giving attention to all participants; (3) minimization of the negative effects of cost sharing. Then the author brings forward the improving measures for constructing effective cost sharing mechanism: (1) ensure the main body status of the government in cost sharing; (2) enlarge financing channels for higher education development, and encourage such social forces as enterprises and individuals to support higher education; (3) establish evaluation system of matching cost-benefit, suitable for all participants of higher education; (4) clarify the status and role of such financial institutions as banks in cost sharing; (5) set the national standard cost of higher education. For mode of repayment, the author draws experience from foreign countries, combines them with the situation of our country, and put forwards the student loans repayment mechanism of "One Body, Two Wings", namely, installment repayment as the body, regional income proportion and national job compensation as the two wings. On the one hand, this can enhance the development of basic services industry in poor mountainous areas and in the places where working conditions and social status are unfavorable; on the other hand, this can offer diversified modes of repayment for those who have received the loans. Hence a good-circulation operational mechanism of student loans is to be nurtured.Fifthly, the commercial banks are faced with great risk of default, for student loans are pure credit loans compelled by the government and the commercial banks are usually the main body. The author analyzes the potential risks of student loans, and probes into the causes of such risks, and then by means of game theory makes an in-depth analysis of risk causes from both the perspectives of the commercial banks and those of the students who have received the loans. In the end, the author makes a research into the measurement and assessment of risks from the angle of the commercial banks.Sixthly, based on the above risk analysis, the author discusses the credit risk management of student loans by the commercial banks from the angle of banks, and makes an analysis of the factors in credit risk of student loans via factor analysis. To strengthen risk management of student loans, the author thinks the following measures are feasible and necessary: (1) establish guarantee fund system for state student loans; (2) security of student loans; (3) establish policies and mechanism favorable to risk management of student loans.In a word, Student loans is an important measure to ensure the equality of higher education for Chinese citizens, and to ensure that the needy students can receive higher education. Based on the already conducted research, the author makes an in-depth study of operational mechanism and risk management for student loans. Certainly there are still some insufficiencies and even defects, and some measures are open to discussion. Therefore, there is still a long way to go about the research into student loans in our country, and more erudite scholars and research staff are needed to give counsel to the efficient operation of student loans.
Keywords/Search Tags:Student Loans, Sharing the Costs of Higher Education, Operational Mechanism, Credit Risk Management
PDF Full Text Request
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