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Jinliang Sun

Professor

ENG 1201

5 December 2019

The reason analysis and countermeasure of university loan problem

Since the 1990s, as the Chinese government has raised education to an unprecedented

height, institutions of higher learning have obtained a rare opportunity for development, and

higher education has shown a rapid development. In order to provide huge financial support

for this rapid development, colleges and universities have invested a lot of funds for

construction investment, and some colleges and universities have to borrow heavily from

Banks. Through bank loans, some universities have embarked on the track of rapid

development, while others have been saddled with heavy debt burdens. The problem of high

loan of colleges and universities and the risk brought by the loan have gradually become a

common concern of the education circle.

Higher education is a costly and costly undertaking. “Since 1999, the enrollment of

institutions of higher learning has been expanded across the country, and the gross enrollment

rate of higher education has reached above 21%, which has completed the transformation

from elite higher education to mass higher education (Sano).” The competition in the field of

higher education is increasingly fierce, and colleges and universities are facing the pressure

of expanding enrollment, running schools and improving the quality of schools. In order to

survive and develop in the competition, institutions of higher learning can only rely on bank

loans for most of the funds they need in the case of serious shortage of national financial

input and narrow financing channels.

As social public welfare undertakings, the loans are mostly used for land acquisition,

school building construction and equipment acquisition, forming excellent fixed assets. Bank
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loans have played a big role in easing the financial strain on universities. Therefore, it is an

effective way for institutions of higher learning to promote the rapid development of higher

education and implement the strategy of rejuvenating the country by science and education to

rationally use credit funds when using bank loans.

College loans, indeed, the college funds nervous, vigorously improve the campus

environment and educational condition, but it is under the specific environment, is a liability

after all, still there is a financial risk, in fact, the loan from the bank once formed a huge debt,

will directly cause the financial crisis, ultimately affect the overall quality of teaching.

Second, causes the university loan question reason analysis

Institutions of higher learning are special legal persons and belong to non-profit

institutions. In the ideology of some university leaders, debt is essentially the government's

debt, and the government should assume the responsibility of paying off the debt of

universities, so there is no risk of bankruptcy of universities. Based on this understanding, it

is inevitable for colleges and universities to generate risks in a series of activities such as

fund raising, use, distribution and management. This kind of risk comes from the market

uncertainty, the imperfect financial order and other external environment, but also from the

university's internal decision-making, management and financial system is not perfect and

other reasons.(Barr)

Serious misunderstandings in ideology and cognition. Incorrect ideological

understanding and lack of risk responsibility are the subjective factors leading to college

loans. Some university leaders believe that universities belong to the state and so do state-

owned Banks. It is justified to spend the money borrowed from Banks on campus

construction. Based on this understanding, many schools only decide the size of loans based

on the interest affordability of loans, with little consideration for the repayment of principal.

The results section of institutions of higher learning high debt ratio, heavy interest payments
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affected the daily expenditure structure of colleges and universities, daily operation of the

tangible benefits spending declined, leading to unstable teachers, teaching and scientific

research quality to drop, affects the efficiency of running a school, resulting in financial risks,

interest has been difficult, debt more weak.

Obvious shortage of daily operating funds. At present, the income of institutions of

higher learning is mainly financial allocation and business fees. The amount of financial

allocation is disproportionate to the rapid development of colleges and universities, so the

income source of institutions of higher learning can only rely on tuition fees. Tuition fee

income is seasonal, while the expenditure of institutions of higher learning mainly includes

salary expenditure, social security expenditure, teaching and research expenditure and

infrastructure expenditure. On the one hand, wage expenditure, social security expenditure,

teaching and research expenditure are frequent, when income cannot meet these rigid

expenditure, can only loan or credit purchase to meet the expenditure; On the other hand,

80% of the infrastructure expenditure of institutions of higher learning depends on bank

loans, which is huge, with a long payback period and uncertain earnings, resulting in waste or

shortage of funds and increased possibility of financial risks.( Montalto)

Objectively, there is a narrow financing dilemma. According to relevant data, the

proportion of government spending on education in GDP from 1997 to 2007 remained at

around 2.5% to 3%, still some way short of the 4% target set in the outline for China's

education reform and development. Since 1999, the implementation of six consecutive years

of expansion policy, so that the scale of enrollment rapidly expanded. By 2007, the number

of college students had reached 5.67 million. The expansion of enrollment in successive years

has increased the number of university-based college students from 3.408 million in 1998 to

20.21 million in 2008. By 2010, the number of Chinese college students is expected to reach

30 million. With the continuous expansion of the scale of running schools and the sharp
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increase in capital demand, colleges and universities are under great pressure to raise funds.

Due to institutional and policy reasons, it is difficult for institutions of higher learning to

obtain funds from non-bank financial institutions, overseas funds, social donations and other

channels. In addition, for Banks, the discount interest provided by the government created a

loose policy environment and provided government guarantees for universities, which to

some extent stimulated institutions of higher learning to apply for and use bank loans too

much.(Velez)

Defects in relevant systems. Along with our country education system reform and the

continuous deepening of the reform of internal management system of colleges and

universities, and the current financial management system has been lagging behind, with

some institutions of higher learning do not take the internal financial management system

construction, the internal financial management system is not comprehensive or related

content, unreasonable economic responsibility is unknown, the chapter has not abide,

accounting information distortion, assets, false of creditor's rights debt, the internal financial

management system become a mere formality, should be rigid and seriousness, and waste of

education resource. On the one hand, loan financing for engineering construction, on the

other hand, a large number of teaching facilities, equipment and equipment idle, low

utilization rate, and in the administrative, logistics services and other aspects of the

management of overcrowding phenomenon, serious waste. These have caused the low

efficiency of the operation of funds, the occurrence of financial risk buried a great hidden

trouble.

It can be seen that liability management has become an important part of university

financial management. How to improve the management level of debt funds, reasonable use

of debt funds, to ensure the normal teaching, scientific research and logistics work in colleges

and universities is an important task faced by financial managers of colleges and universities.
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Three, prevent and solve the university loan problem countermeasure

To prevent and properly deal with the problems caused by university debt, we should

take targeted measures from the source and establish the concept of sustainable development.

In addition to increased financial input from the government, strict approval procedures for

college loans from Banks, and enhanced use of post-loan funds, colleges and universities

should tap their own potential, increase income and reduce expenditure, improve the system,

step up financial supervision, become more self-reliant, and do their best to reverse the

passive situation of finance as soon as possible.

Establish an early warning system for debt repayment and risks. First, we need to

tighten restrictions on the economic behavior of leaders, strengthen the collective approval

system for major financial decisions, the system of public financial reporting, and implement

the quota system for office expenses and travel expenses. Second, be reasonable to arrange

debt service disbursements. A certain percentage of the income from tuition and

accommodation returned from the financial account shall be withdrawn each year for the

establishment of a sinking fund. Plan well servicing at the same time, reasonable arrangement

the loan structure for medium and long-term, medium-term and short-term loan proportion,

under the overall planning, evaluation of the school's ability to repay the loan principal and

interest, to determine the loan amount, loan cordon reasonable, scattered loan repayment

period, reduce the pressure of repayment of institutions of higher learning, to achieve the

purpose of evading financial risks. As the saying goes, "it is never too late to mend", the key

is to establish an early warning system of financial risk, to prevent the recurrence of blind

loan problems, to predict the debt risk as early as possible, and to take appropriate measures

to prevent it from happening, and to control and defuse the risk in time.

2. Broaden financing channels in an all-round way. Colleges and universities should

make full use of their autonomy in running schools, recruiting students and financing to
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actively expand the channels of financing, so as to provide funds for the further development

of colleges and universities--- land replacement.

Through the transfer of the city's "golden location" campus, to obtain a larger amount

of their own funds. In this way, we can not only exchange part of the construction fund for

the new campus, reduce the loan risk, but also integrate the resources of higher education,

reduce the operating cost of colleges and universities, and improve the efficiency of running

schools. make the best use of existing resources. On the premise that national policies permit

it and do not affect the quality of teaching, schools should run schools in various forms, such

as carrying out training activities and developing adult education, so as to increase the

income of schools. We should provide scientific and technological services to the society,

take the road of combining schools with enterprises, actively transform science and

technology into productive forces, increase income and enhance the strength of running

schools-- seeking social donations. By setting up a good social image, strengthening and

expanding the intensity of publicity, and keeping close contact with all walks of life outside

the school, attracting donations from all walks of life is another important way to increase the

source of funds for institutions of higher learning.

Give full play to the role of logistics socialization management. Make full use of the

preferential policies of the state, carry out the standardized operation of the combination of

production, study, research and business, improve the operating efficiency of school-run

enterprises, ensure the maintenance and appreciation of state-owned assets, provide guarantee

for the re-loan of colleges and universities, dissolve the operating risks of loans. After the

socialization of logistics, the follow-up investment in logistics is reduced, or even no more

investment is needed, and a certain proportion of management fees can be charged, which

increases the income of the school. Meanwhile, it provides a good opportunity for teachers
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and students to link theory with practice, and promotes the work of production, learning and

research.

Establish and improve the financial management system. On the one hand, we need

to establish and improve a comprehensive budget management system. Budget management

is the premise and basis for institutions of higher learning to carry out various financial

activities in a planned way. We will establish and improve a budget management system to

clarify the scope of revenue and expenditure, the procedures for compiling the budget, the

principles and methods for compiling the budget, as well as the responsibilities and powers at

all levels and the basis for evaluating the budget.

According to Interlibrary Loan in College Libraries. Association of College and

Research Libraries, at the same time, the whole process of budget implementation is

monitored, the expenditure structure of funds is optimized and the correct use of funds is

ensured. The results of budget implementation are scientifically analyzed and summarized to

reveal the existing problems, so as to provide a basis for the next budget period and reduce

the financial risks of colleges and universities. On the other hand, we should establish and

improve the asset management system to ensure the maintenance of asset value. To establish

the property rights system, clarify the ownership relationship and property rights definition of

the assets of colleges and universities, and clarify the responsibilities and obligations of

relevant departments in the asset management; Comprehensive means of, in accordance with

the law department of check and ratify the amount of assets, strictly control the incremental

assets, standard asset management work at the same time, fixed assets from the purchase, use,

storage, clean up scrap, transfer must follow the relevant rules and regulations, make the

institutions of higher learning can make full and effective and reasonable use of existing

assets, achieve the purpose of saving money. At the same time, we should establish incentive

mechanism and performance evaluation system, strengthen the whole process management of
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assets, distinguish rewards and punishments, improve the internal motivation of asset users,

promote the rational allocation and saving of university assets, and better serve the overall

goal of teaching and scientific research development of institutions of higher

learning.(Bustos)

Anyhow, institutions of higher learning in the face of potential risks and

complications from the bank loans, only to strengthen the financial management work,

adhere to the principle of social public welfare and sustainable development, and efforts to

get rid of the dependence on appropriated government finances and the national Treasury,

established the and expansion of higher cost internalization mechanism, carry on the tradition

of thrift education, really put attention to the education and teaching, focus on the cultivation

of the talent team construction of the teachers and students ability to this fundamental

problem, huge loans to minimize the risk of limit, the negative effect can be gradually

resolved.

The theoretical basis of the student loan system is the theory of "cost sharing" and

"education equity". At the beginning of last century, many foreign scholars began to study

the subject of student loan. In some countries in northern Europe, such as Denmark and

Sweden, the state student loan system was established one after another, which promoted the

development of higher education in their own countries. These countries are the first to carry

out the research and implementation of national student loan. But student loans were widely

studied and implemented worldwide after world war ii. So far, more than 60 countries and

regions around the world have implemented student loan systems with their own

characteristics.

In terms of the implementation of student loans, governments of various countries

have established unique systems, among which "American model", "western European

model" and "Japanese model" are the most typical.

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American model: since 1965, the United States has established a poverty assistance

system for college students through legislation, and implemented differentiated charging

standards for college students. The ways and amounts of assistance for college students are

flexible and varied. The funds are raised through the federal government, charities, state

governments, universities, etc., mainly through the federal government's aid to students.

Western European model: this model is represented by the former Soviet union and

other socialist countries, the United Kingdom, the federal republic of Germany and other

western countries. Its typical feature is the "free higher education plus grant funding model".

At one point, the system was in place in more than 50 countries. “In 1988, the United

Kingdom proposed to reform the financial system of higher education. Based on the

"education reform act", it published the "limited student loan scheme", which was formally

implemented in 1990 (Johanson).”

Japanese model: for a long time, Japan has implemented a fee-paying education

system for higher education. In order to alleviate the economic pressure of poor students,

Japan has implemented a sound student aid system based on student loans. In 2002, zhang

jianqi analyzed the formation, implementation and effect of the policy of "free tuition and

people's financial aid", combined with the development trend of international financial aid for

college students and the reality of China, and proposed the financial aid method for

impoverished college students in China. In 2008, ji hong et al. made an in-depth analysis of

foreign advanced student loan concepts and compared them with the domestic situation.

These research results are helpful to promote the in-depth study of the student loan system in

China.

It has become a global consensus that talent is a valuable resource for a country's

political and economic development. The main way to train talents is higher education. Over

the past decades, countries around the world have made great efforts to develop higher
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education. The development of higher education, requires a huge financial investment. First

of all, the development of higher education is inseparable from the improvement of hardware

conditions, such as the construction and renovation of teaching buildings, student

dormitories, office buildings, libraries, laboratories and student activity venues. At the same

time, the development of higher education also needs the improvement of software

conditions. Therefore, higher education needs a lot of running costs.

Historically, people have actively advocated educational equity, believing that

everyone has the equal right to receive education, no matter how high or low he is. At

present, education equity has become the universal consensus of the international community,

and is one of the common principles for the development of higher education in the world.

Among them, educational opportunity equality is one of the core contents of educational

equity principle. The so-called equal educational opportunity means that everyone has equal

access to education. In China, due to the imbalance of regional economic development, there

is a gap between the rich and the poor between different regions and between urban and rural

areas. Under the university charging system, the gap between the rich and the poor inevitably

leads to the inequality of people's access to education, which objectively violates the

principle of educational equity. For example, in poor and backward areas, education

infrastructure is poor and teachers are weak. In such difficult conditions, children can hardly

have the same right to higher education as children in rich areas.

Under the background of higher education cost-sharing system in China, the right of

children from poor families to receive higher education ff equally should be respected by the

whole society. The government should formulate and improve the system of aid for poor

students and ensure that the principle of equity in higher education, especially the principle of

equal educational opportunities, is implemented in every sense under the realistic conditions.
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As the most important means of financial aid for poor students, China's student loan system

has shown great prosperity since its implementation. Has enabled many students with

economic difficulties to successfully complete their university studies, changed the poverty

situation of individuals and families, and realized their dreams. Therefore, China's student

loan system effectively guarantees the equality of higher education opportunities and

promotes the realization of educational equity in China.

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Work Cited

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Sano, Shinpei. “The Effect of Student Loans on College Enrollment: Evidence from

Municipality Panel Data in Japan.” JAPAN AND THE WORLD ECONOMY, vol.

52. EBSCOhost, doi:10.1016/j.japwor.2019.100979. Accessed 16 Dec. 2019.

Choosing Your Student Loan : Paying for College. 2016. EBSCOhost,

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&site=eds-live.

Bustos, Roxann. Interlibrary Loan in College Libraries. Association of College and Research

Libraries, 1993. EBSCOhost,

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Capital Financing [Electronic Resource] : Department Management Improvements Could

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Universities : Report to Congressional Requesters. [Washington, D.C.] : U.S.

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Montalto, Catherine P., et al. “College Student Financial Wellness: Student Loans and

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Opportunities, House of Representatives / United States General Accounting

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Graduates’ Employment, Additional Schooling, Family Formation, and Home

Ownership.” Education Economics, vol. 27, no. 2, Jan. 2019, pp. 186–206.

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