Li Gefeng, a graduate from central China's Hunan University, was frustrated upon graduating last month when the debt he owned to the university made it look as though getting a job would be impossible.

Born to a poor family in a small village in Hunan, Li and his family had far from enough money to pay his tuition and accommodation fees for his four years of study at university. But Li counted on getting a student loan from the bank when he registered four years ago with 6,000 yuan (US$722), all the money his family could borrow.

However, Li found it very difficult to get a bank loan to cover his tuition, accommodation and living expenses, since there were always too many applicants and some student borrowers' previous repayment defaults made the bank less likely to approve new loans.

After repeated applications, Li finally got a paltry 4,000 yuan (US$481) from the student loan program in 2002, hardly enough to sustain him for one year.

Ultimately, Li ended up with a huge debt to the university, totaling 11,100 yuan (US$1,337).

Last month, Li felt that he had met with good fortune when Guangdong's Midea Holding Company offered him a job upon graduation. "For me, that job will get me out of poverty and enable me to repay the university debt and the student loan," said Li.

However, the excitement did not last long. Before he could complete an employment contract, he was required to present certain documents, including graduation and degree certificates and assignment documents. The university refused to issue them until he had paid his debt.

Most employers require documentary proof of graduation, and .the lack of an assignment document from the university made it impossible to apply for a residency card at the local public security department.

Li is not alone.

Eight of his classmates who owed money to the university were also rejected by potential employers for the same reason. Estimates put the number of students unable to obtain their diplomas this year because of debt at no less than 500.

"It is illogical for the university to refuse to issue the certificates to us after graduation. Without the certificates, we cannot get jobs. Only when we have jobs can we repay what we owe," Li said.

However, Hunan University official Zhou Mengjun told Guangzhou's Nanfang Weekend that at present, they have no other way to deal with students' debts to the university.

"Tuition owed by students has become a big financial burden to us since more and more graduates fail to repay the university," said Zhou.

According to Zhou, more than 5 million yuan (US$604,500) in back tuition is owed this year.

What happened on the campus of the Hunan University is neither incidental nor accidental, with thousands of college students facing the same situation at graduation. Huang, an official in the graduates' employment office at Guangdong University of Foreign Studies, told China Daily that there were also graduates rejected for jobs because they could not get certificates from his university.

"As far as I know, the university has not granted graduation and degree certificates to some students who haven't paid for tuition and accommodation," said Huang. "Those who haven't paid back student loans by specified times are also rejected."

Chen Zhe, who is in charge of student loans at the university, confirmed that the university has held back graduation and degree certificates from nearly 180 new grads this year. Some owed tuition and accommodation fees to the university. Others failed to pay back student loans to their banks by the required times.

According to the current student loan programs, a repayment agreement must be signed by the student borrower, the bank and the university to ensure timely repayments after graduation.

"The bank keeps the graduation and degree certificates of those who have difficulties in abiding by the repayment agreements. Once the students repay the fees to the bank, the certificates will be issued to them," Chen said.

"The graduates whose certificates are withheld are allowed to have the graduation and degree certificates copied if their work units allow it," said Chen. In addition, Chen said if the students' work units are willing to serve as guarantors, with documents stating terms such as repayment time and amount of the loaned tuition fees and living expenses, the students are able to get the certificates.

The student loan program was first introduced to help poor youth realize their dreams of higher education in 1999. However, the program has become seriously strained in recent years by the weight of bad debts.

According to Zhu Junwen, director of the Loans Administration Center for College Students of the Guangdong Bureau of Education, over 23,000 students from 64 colleges and institutes in the province have applied for loans since the program was launched five years ago. The value of contracted loans now totals about 310 million yuan (US$37.5 million) while that actually used reaches more than 210 million yuan (US$25.4 million). However, some places, the default rate can be as high as 20 percent.

Although the banks have promised not to cancel the loan program, they are justified in raising the bar to get a student loan. The number of defaults on these loans is expected to increase in the next two years in any event, simply because of increased student quotas at the schools.

In July, the Ministry of Education, the Ministry of Finance, the People's Bank of China and the China Banking Regulatory Committee launched a program to revive the nation's student loan program.

A major change to the student loan policy is that the repayment term is extended from the previous four years to six years after graduation. This is substantially helpful, as the job market is growing increasingly competitive: about 2.8 million students graduated from college this summer, an increase of nearly one-third over the last year.

By extending the term of repayment to six years and requiring colleges to set up loan compensation funds that will enhance the schools' participation in overseeing repayments, the situation for impoverished students is expected to improve.

(China Daily August 10, 2004)