Analysis About The Implementation Plight Of Government-subsidized Student Loan In China

The cost-sharing theory put forward by American economist D.Bruce Jonhnstone in 1986 refers a shift in the burden of higher education costs from government or taxpayers exclusively paying to being shared among the government,students,parents,and social institutions(including universities and colleges).By this way,the equality and efficiency of higher education may be enhanced in some sense.However,we must note the negative impact of this shift to the low-income families,which may deprive the education right of the eligible students from poor families.The student loans have been adopted to solve this problem by many countries.Today,government-sponsored student loans schemes are in place in some 70 countries and regions around this world.The Government Subsidized Student Loan has been launched in China since 1999.As a developping country with a large population and unbalanced regional economic development,we're faced with a lot of problems,including the high default rates,the commercial banks which are reluctunt to lend,the unbalanced scheme promotion in different regions.However,all these do not mean the student loans are inefficient,and should be abandoned.The successful experiences of many other countries tell us that relieving the burden of government on higher education costs and ensuring the education right of students with poor economic condition can be achieved at the same time through the sudent loans schemes. So,the only thing we can be sure from these problem is our student loans scheme is not designed soundly,there are much space for improving.Using the basic principal-agent theory involving the asymmetric information and conflict of interest,this paper attempts to analyze the relations among the agents in student loans scheme,including the government(the Central government and the local government),the lending banks,the colleges,and the borrowing students.This approach can help us understand the exact roles of agents in student loans scheme which include their respective advantages and disadvantages of information.Thus,we can design the policies which provide incentives to different agents and make the student loans scheme more effective.The main conclusions of this paper include:(1)more strict and specific eligibility criteria which demands not only the information on the students'families'incomes,but also the information on parents'education level and current profession.(2)the risk compensation afforded by colleges should be adjusted according to the default rates of the corresponding repayment phase.(3)if the same standard of the final result for different colleges is assumed, then the stronger the average repayment ability of one college,the smaller span of the risk compensation this college should afford,which means a larger proportion of the risk compensation.(4)the central financial sector should replace the regional financial sector which has a large budget pressure to afford the interest subsidy provided to the students;and reduce the total risk compensation from both government and colleges in this kind of regions.(5)the repayment should be designed according to the trend of the increasing incomes(income contingent repayments schemes),and with floating interest rate.Among these conclusions,the first and fifth point have been implemented in some countries.Although the specific terms might be different in the contracts of different countries, the roles and functioning ways of these measures are the same.This paper believes these two measures can be also taken in China.lt would play a important role in controlling the "adverse selection" phenomenon and reducing the repayment pressure of relevant students.The second and third point is about the risk compensation ratio issue.This paper attempts to present some proposals for the existing policies from the perspective of equity.The fourth point concerns the inequality between Central government and the local government,which is the extension of the imbalance between central-owned colleges and local-owned colleges. The innovation of this paper include:looking into the current student loans scheme in China From the perspective of Economics of Information;suggesting the yearly risk compensation afforded by colleges should be floating with the default rates in the correspond repayment phase;dividing the government into the Central government and the local government to analyze and solve the unbalanced scheme promotion in different regions.These are also the conclusions 2,3,4 in the last paragraph.This paper is divided into 5 parts:The First part introduced the reason why we choose this subject,including the theoretical and practical significance,and we would review the relevant study on student loans schemes by foreign and native scholars.The second part talked about the development of Government Subsidized Student Loan in China,including:the role of Government Subsidized Student Loan in cost-sharing higher education in China;the stages of development of Government Subsidized Student Loan in China; the ambiguous concepts about Government Subsidized Student Loan.The third part gave the economic explanition:considering the actual situation of China, deeply analyze the respective interests of agents who participate the scheme based on the principal-agent model.The fourth part analyzed and compared the experiences of other countries and regions(most part are Hongkong and India) on student loans schemes,make some suggestions which should be promoted in China.The fifth part,the conclusion.