Student loans increase as tuition fees rise amid faltering economy

With Chinese students facing huge rises in university tuition fees from the recently commenced new academic year, Chinese authorities have announced big rises in low-interest government-subsidised student loans to ease the burden on families and improve university access.

China’s education ministry announced a rise of almost 33% in the amount disadvantaged undergraduate students can borrow starting from this autumn semester to CNY12,000 (US$1,663) annually – up from CNY8,000. Graduate students will see a 25% rise in the loan amount from CNY12,000 annually to CNY16,000.

The loan increases are an acknowledgement of the difficulties disadvantaged students, and particularly those in rural areas, are facing with the current economic downturn in China, in particular, a severe contraction in manufacturing and construction.

Crucially, students who had already applied for loans will be able to get the new amounts, as well as just-announced lower payback interest rates.

Initial statistics from the Ministry of Education indicated around 5.81 million students – roughly half the undergraduate student body – had applied for student loans in 2023. The number of students applying for state loans is expected to be 10% more than last year, according to government estimates.

Earlier this year, to make up for reduced funding from cash-strapped local governments, universities began announcing tuition fee rises – in some cases as high as 54% compared to last year but with many breaching the CNY7,000 barrier.

Netizens on China’s Weibo social media platform derided tuition fee rises saying that “wages are falling, not rising, so why does the tuition fee rise?” However, an academic in Guangzhou in Southern Guangdong province told University World News on condition of anonymity that “tuition fee rises have not been as fast as the inflation rate, and in many cases these are the first tuition fee rises in two decades”.

Behind the fee rises, official media said that the Ministry of Education’s financial allocation for higher education was reduced this year by around 3.7%, with some universities seeing budget reductions of 10% or more. Universities have had to increase fees to bridge the gap.

Surveys in China have shown tuition fee increases ranging from 20% to 40% with 54% among the highest, but students also complain of hidden rises such as canteen food and other costs.

In April the city of Shanghai raised fees for the current academic year for the first time in two decades to around CNY6,500 for humanities students, CNY7,000 for science and engineering and CNY7,400 for medicine. The city urged public universities to use up to 6% of their income each year to help subsidise students and provide other support for students including cash prizes, loans, aid and exemptions.

In Beijing universities were keen to publicise their gift packs for new students. At the China University of Mining and Technology in Beijing these included a campus card recharged with CNY300, bedding worth CNY500 and other materials.

Graduate debt alleviation

Earlier this year China’s State Council said students who graduated in or before 2023 will be exempt from paying interest on loans this year. This was as part of its measures to ease the burden on job-seeking new graduates given that youth unemployment rose above 21% in June, before the government stopped releasing the sensitive youth unemployment figures.

New graduates can also apply to defer this year’s repayment of the student loan principal for one year without penalties, the announcement said. In the past the principal and loan were paid within six years of graduation. This was extended to 15 years after graduation in 2020.

The loan repayment exemption measures were first introduced in 2022 as new graduates faced a pandemic-induced economic downturn at the same time that record numbers were graduating. The measures have been extended to this year as 11.58 million students graduated this summer.

In April, Ou Wenhan, an official with the Ministry of Finance, said that CNY2.325 billion (around US$322 million) of national student loan interest is expected to be exempted this year. The principal amount that can be applied for deferred repayment is about CNY5.5 billion, benefitting approximately four million graduates.

In addition, data released by the China Banking and Insurance Regulatory Commission in March this year shows that in 2022 banking institutions exempted CNY1.93 billion of national student loan interest, benefitting 3.74 million loan students, and extended nearly CNY600 million worth of loans for 103,000 students throughout the year.