Bank sues in-debt graduates
By Guan Xiaomeng (Chinadaily.com.cn)
Updated: 2006-01-06 14:28

China Construction Bank (CCB) recently took 23 graduates from the Beijing branch of China Petroleum University to court for failing to repay bank loans according to their contractual obligation, the Beijing Times reported.

The bank is claiming the end of the contract and the repayment of the principal loan plus interest.

CCB said in its affidavit that the 23 then students of China Petroleum University borrowed from its loans of different amounts from 2000 to 2002.

It is reported that the students each signed a contract with the bank before their graduation. According to the terms, the students should repay the loans in the form of installment from the first September after they graduate, while the bank has the right to cancel the contact if the students fail to repay any money within three months after the due date.

The bank fulfilled its obligation to provide all the money to the students. However, the students paid back none of the money after they graduated.

According to the report, the largest debt amount is more than 36,000 yuan (US$44,461.74) while the smallest is more than 3,000 yuan (US$371.81). The bank said that currently it cannot get in contact with some of the students.

A teacher in charge of the university's students' loans said the administration inform in-debt students to repay their loans every term but graduates are not included among those they inform.

A bank clerk said the bank had stopped providing money to poor students from China Petroleum University's Beijing branch because of their low repayment rate.

At the same time, the bank claims that risks loom, as default loans remain a problem. It is reported that more than 20 percent of the loans to some universities remain unpaid.

Launched in 2001, the school loans system still lacks a risk liability-sharing mechanism despite some improvements made in 2004. As a result, banks are reluctant to loan money to students.

Meanwhile, some students have expressed worries of running into difficulties in repaying after they graduate.

"If the bank asks us to repay from the first month after we graduate, it will be not easy for us, who are fresh from campus and especially under such an employment pressure," one student said.

"Not all of us intentionally default," said another student. "Some of us plan on repaying the money through every means, but the repayment plan needs to become more practical."