The Design Of A Diversified Repayment Model For The Government-Subsidized Student Loan In China

Since its implementation in the last 5 years, the Government-Subsidized Student Loan has become the most efficient policy solution to help the needy students out of economic difficulties because it has the widest coverage and the most powerful aiding capacity. However, with the approaching of repayment deadline, repayment defaults also begin to occur and severely influence the smooth implementation of the student loan. In this case, it is very significant to conduct peculiar research into the repayment of student loans. The repayment of student loans is closely related to the expected return of the graduates. As a matter of fact, graduates' future individual income differs greatly from each other in many countries. The repayment model of the Government-Subsidized Student Loan in China seems to be very monotonous and thus hinders the smooth implementation of the student loan scheme. This dissertation takes the difference in the private return as the starting point, and then designs a diversified repayment model for the Government-Subsidized Student Loan. The research mainly consists of the following 4 parts. Part one (Chapter Two) is the theoretical and empirical research on the private cost and benefit of higher education. This part takes the human capital theory as the theoretical base because it is related to the private return of higher education; after expounding the research on the rate of private return to higher education both at home and abroad, we also calculate the private return to higher education of those students who have obtained student loan, as a result, we found that the private return of this student group was comparatively higher than that of the students who have not obtained student loans. Furthermore, we also found that among those students who have obtained student loans, the private return to higher education was also influenced by the different repayment policies. The "New Policy" extended the repayment period, so it would obviously help to improve the private return to higher education. Part two (Chapter Three) focuses on the international practice of the repayment of student loans. With the help of comparative methodology, this part compares both advantages and disadvantages between the conventional mortgage-type student loan and the income contingent loan. Then, student loan repayment burden ratio is also studied and compared; in most countries, 10% of the income is taken as the criterion of the repayment. Moreover, comparison is also made on the financial analysis of the student loan repayment in different countries; the calculation and empirical study on the relationship between hidden grant and repayment ratio, administrative cost and default ratio and recovery ratio all showed that there exist great differences in the recovery efficiency of student loans in different countries. Finally, this part also summarizes the experiences of preventing repayment defaults in the United States which can also provide useful references for our study in China. Part three (Chapter Four) probes into the problems of the current Government-Subsidized Student Loan. After studying the repayment conditions of the policies and tracing the policy reforms in the past 5 years, we found that our policies were changed too frequently, and on the other hand, the policies were far from proactive. Consequently, we also made analysis into the financial status of the student loans in our country and calculated the repayment burden ratio, loan repayment ratio and loan recovery ratio; according to the findings, both the repayment burden ratio and loan repayment ratio proved to be quite high. Although the repayment period was extended to 6 years in the "New Policy", there was still little improvement in the financial status of the student loan repayment, all the indicators still remained to be quite high. With the findings in the investigation, we probed into the possible reasons of the repayment defaults and also analyzed the importance of each reason in detail. Finally, the main disadvantages of the current Government-Subsidized Student Loan were summarized as follows: the policy is too changeable; the interest of loans is too high; the repayment model is monotonous; the repayment period is not reasonable; and there are no matching discharge measures. Part four (Chapter Five) is the design of the diversified repayment model for the Government-Subsidized Student Loan. The first step tried to find out the main factors which influence the graduates' income. One-way analysis of variance was used here to identify the influences made by different regions, working units, different professions and different jobs. The graduates' income was further divided into 3 levels: high, intermediate and low. And then ordinal logistic regression was used to analyze the degree of influences made by the regions, working units and professions. This laid a solid foundation for the design of the repayment model. The second step designed an arithmetical progression repayment model based on the assumption with a maximum repayment burden ratio of 10%. With help of the above-mentioned conclusion of income differences, we designed different repayment models for payers with different income levels; and reasonable repayment period was also calculated respectively for the payers. After combining the advantages of both the conventional mortgage-type student loan and income contingent loan, geometric proportion repayment model was thus recommended, this means that payers with different income levels can have different repayment models. Apart from the above two models, expiration of repayment model was also put forward.The third step analyzed that in order to ensure the smooth implementation of the diversified repayment models, efficient loan recovery organizations and the corresponding discharge measures should also be established. Based on both the international practice and the current realities in China, the dissertation recommended 7 types of loan recovery organizations should be established and 5 discharge measures should be improved.