Chinese college students are starting to struggle with loan repayments
Compared to the US, Europe, Japan, and South Korea, few Chinese university students need student loans. In particular, over the past few decades, real estate–driven transfers have kept Chinese university tuition very low (around 4,000 RMB), and living expenses in campus cafeterias are also low—costing roughly only 30% of takeout meals. But in the last couple of years, as the property market has struggled, prices have begun rising across the board, including university costs. Still, it’s far better than in the West or East Asia, where students often graduate with $200,000 in loans. In China, 20,000 RMB a year is usually enough. You can easily calculate the total loan cost over four years of undergraduate, three years of master’s, or several years of PhD. And national aid policies continue to offer interest subsidies—for example, interest is waived for the first 4–5 years after graduation. Interest only accrues if the loan isn’t fully repaid during that period, and the rate is very low, typically at least 30 basis points below the benchmark. For instance, if the current prescribed rate is 3%, student loans usually carry a rate of 2.7%.
Attending university today can indeed be a financial burden, but parents can help their children take on student loans early to feel the pressure of adult life while easing the family’s cash-flow strain and taking full advantage of the interest-free period.
The case described in the article illustrates someone who couldn’t repay their loan—a sign that the job market really has been rough in recent years.