Laws of the Shanghai Province

In accordance with the requirements of the "Notice of the General Office of the State Council on Transmitting 'Suggestions of the Ministry of Education, the Ministry of Finance, the People' s Bank of China and the Banking Regulatory Commission on Further Perfecting the Work of Granting State Student Loans' " (SCGO[2004]No.51) and in the light of the actual conditions, the following implementation suggestions for this Municipality are hereby put forward:

1. Reach a common understanding, strengthen coordination and continually perfect policies of Shanghai ordinary institutions of higher learning on state student loans

(1) Deepen ideological understanding

Granting state student loans is a major measure of the Party Central Committee and the State Council under the condition of a socialist market economy to perfect by financial means the policy system of financial aid from ordinary institutions of higher learning in our country and a powerful guarantee for developing education, training up talents and realizing the goal of building up our nation through the development of science, technology and education. All relevant units in this Municipality shall, from the political perspective, fully recognize the importance of the State policy on student loans, strengthen coordination and make joint efforts to do a good job of relevant work.

(2) Adhere to the principle of "providing easy access to loans and taking precautions against risks"

Further rationalize the economic relationships among banks, institutions of higher learning and students, strengthen the management system of state student loans, reinforce the management functions and responsibilities of institutions of higher learning and banks, perfect the binding mechanisms for loan repayment and the mechanisms for risk prevention, and ensure the steady and healthy development of state student loans.

(3) Reform the current mode of subsidization of interest by public finance

Starting from the autumn of 2004, change the past practice of granting financial subsidies amounting to 50 per cent of the student loan interest during the whole loan contract term, and introduce the method of subsidization by public finance of the full amount of loan interest accrued to the borrowing student during the period of his or her schooling and payment in full by the student himself or herself upon graduation. The borrowing student shall begin to pay interest upon graduation. (See Annex 1 for details of the procedure)

As to students who entered into loan contracts before the above specified time, the procedures on loan granting, interest subsidies and loan repayment as provided by the original regulations shall continue to apply.

(4) Extend the term of loan repayment

Change the current practice whereby a student begins to repay the loan principal from the date of graduation and pays it off within four years, and introduce the practice whereby a borrowing student begins to make loan repayment one or two years after graduation and pays off the loan within six years, depending on his or her employment status. When performing graduation formalities or formalities for termination of studies, a borrowing student shall confirm his or her loan repayment schedule to the bank handling state student loans, and the repayment term shall be determined between the creditor and the debtor through consultations. A borrowing student who continues to study for a degree shall provide the handling bank in a timely manner with a written certificate of his or her continuation of studies for a degree, and the finance department shall continue to grant interest subsidies to him or her as a enrolled student. A borrowing student may, within one year after graduation or termination of studies, apply for once to the bank for adjustment to his or her repayment schedule, and the handling bank shall accept the application and make appropriate adjustments, taking into consideration the actual circumstances and in accordance with applicable regulations. Repayment of loan principal and interest may take a variety of forms, including early repayment in a lump sum or in installments. In case of early repayment, the handling bank shall calculate interest on the basis of the actual life of the loan and no extra fees other than payable interest may be charged.

(5) Introduce the method of inviting public bids from handling banks

On the basis of cooperation between banks and schools over the past few years, public bidding may be conducted by adopting the mode of "grouping of several schools" or "depositor-and-creditor cooperation" to determine the handling bank for state student loans from Shanghai-based ordinary institutions of higher learning (including ordinary vocational colleges, the same below).

In 2004, Shanghai local ordinary institutions of higher learning may, in the light of their experience in previous bank-and-school cooperation, entrust the Shanghai Student Loan Management Center (represented by the Financial Settlement Management Center of the Shanghai Education Commission during its preparation period) to determine the handling bank for state students loans through public bidding. Once the handling bank is determined, the Shanghai Student Loan Management Center shall enter into a legally binding loan cooperation agreement with the bank.

The handling bank shall, in a timely manner, place the full amount of state student loans and provide related services as stipulated in the agreement; it shall streamline the loan procedure, draw up a uniform loan contract text, standardize the cycle of processing loans and furnish ordinary institutions of higher learning with timely information on loan repayment by their students. The Shanghai Student Loan Management Center shall, in a timely manner, pay the full amount of risk compensation funds as stipulated in the agreement; each institution of higher learning shall provide the risk compensation funds as stipulated in the agreement and cooperate with the bank in demanding repayment so as to minimize financial risks.

(6) Set quotas for loans to be granted.

The total amount of loans for each school per year shall in principle be determined by applying the standard rate of 6,000 yuan per person each year to the proportion of 10¨C20 per cent of the total number of enrolled junior and regular college students (including vocational college students, the same below), post-graduates and second bachelor-degree students of full-time ordinary institutions of higher learning. The specific quota of loans for each ordinary institution of higher learning shall be separately set and issued by the functional department for student loan management under the Municipal Education Commission in the light of the actual conditions of needy students and the extent of breach of loan repayment contracts by borrowing students in each ordinary institution of higher learning.

2. Establish and perfect the mechanisms for the prevention of and compensation for loan repayment risks

(1) Establish binding mechanisms for students to repay loans

The Shanghai Joint Personal Credit Information Collecting System, all handling banks of state student loans, the Shanghai Student Loan Management Agency and all ordinary institutions of higher learning shall assume their respective responsibility and jointly establish binding mechanisms for loan repayment.

The Shanghai Joint Personal Credit Information Collecting System shall play an active role by collecting and sorting out timely information related to state student loans.

All handling banks shall establish an effective repayment monitoring system and do a good job of related work. They shall actively carry on publicity work on loan repayment among borrowing students, explain to them repayment procedures and mode; perform in a timely manner repayment confirmation formalities for borrowing students; strengthen the routine work of demanding repayment and keep a proper record of repayment calls; with regard to students who fail to repay state student loans in accordance with the term and amount stipulated in the agreement, the handling bank may charge penalty interest on the overdue loan amount and put their acts of non-performance on record in The Shanghai Joint Personal Credit Information Collecting System, and financial institutions may not provide new loans or other credit services for them; and the handling bank shall periodically provide the names, citizen ID numbers, graduation schools and acts of non-performance of the borrowing students who have continually defaulted in repaying loans for over one year and have never contacted the handling bank on their own initiative to state student loan management centers all over the country or the Shanghai State Student Loan Management Center, depending on their administrative jurisdiction.

All ordinary institutions of higher learning shall keep on perfecting the building of student good faith files, strengthen post-loan management of students and furnish timely information on loanee students to the state student loan management departments under the Municipal Education Commission and the handling bank. The student loan management departments at the municipal and school levels shall join The Shanghai Joint Personal Credit Information Collecting System in setting up a mechanism for student credit information exchange, keep on perfecting the management of information on loanee students, call on and encourage college students to take the initiative in producing their personal "student credit files" to their prospective employers for their reference when seeking employment or accepting offers of employment. The municipal public security departments shall take effective actions to ensure the success of the issuance of second-generation resident IDs for ordinary college students and cooperate with the handling banks in checking the identity of the defaulting students.

(2) Establish risk compensation mechanisms for state student loans in this Municipality.

Risk compensation mechanisms for state student loans shall be established in line with the principle of "risk sharing" , so as to encourage banks to provide state student loan services.

The municipal finance departments and ordinary institutions of higher learning in this Municipality shall set up special-purpose funds for state student loan risk compensation, amounting to a specified proportion of the total loans granted in the current year, so as to provide appropriate compensations to the handling bank, and the specific proportion shall be determined during the bidding process. The municipal finance departments and ordinary institutions of higher learning shall respectively bear 50 per cent of the special-purpose fund for risk compensation for state student loans extended by Shanghai local institutions of higher learning and the Shanghai Student Loan Management Center shall be responsible for the management thereof. (See Annex 2 for details of the procedure).

3. Earnestly strengthen the leadership, management and supervision of state student loan work.

(1) Reorganize the coordinating group of Shanghai Municipality for state student loan work.

The coordinating group, headed by the deputy-secretary general of the Municipal People' s Government in charge of the work, with membership from the Municipal Education Commission, the Municipal Finance Bureau, the Municipal Finance Office, the Shanghai Branch of the People' s Bank of China, the Shanghai Banking Regulatory Administration, the Municipal Informatization Commission, the Municipal Public Security Bureau and other departments, shall study and solve problems that arise in the process of implementation of state student loans by institutions of higher learning in Shanghai.

(2) Strengthen state student loan management agencies in this Municipality, further intensify and improve management.

The Municipal Education Commission shall step up the building of state student loan management agencies, prepare for the establishment of the Shanghai Student Loan Management Center, assign and appoint appropriate working personnel to it and guarantee necessary working funds.

The Shanghai State Student Loan Management Agency has the following functions:

1. Organize and plan for the implementation of state student loans by ordinary institutions of higher learning in Shanghai;

2. Determine through bidding the handling bank for state student loans from ordinary institutions of higher learning under municipal administration in Shanghai, enter into a loan cooperation agreement with the handling bank and do a good job of management work in every aspect in strict accordance with the stipulations of the agreement;

3. Exercise unified control over the funds for state student loan interest-subsidization allocated by the municipal finance department and the special-purpose funds for risk compensation for state student loans from ordinary institutions of higher learning under the jurisdiction of Shanghai set up in accordance with these Suggestions;

4. Establish and perfect the state student loan information management system and the statistical monitoring system;

5. Publish on a regular basis through the news media related information on defaulting borrowers provided by the handling bank; and

6. Report related information and submit relevant statements on a regular basis to the state student loan work coordinating group of this Municipality.

All ordinary institutions of higher learning shall strengthen the management of state student loans. A special working agency shall be set up, in the direct charge of a school leader. In principle, full-time working personnel shall be assigned and appointed to it from the current established posts, in the ratio of 1:2500 of the number of enrolled full-time ordinary junior and regular college students and postgraduates. Detailed rules on state student loan management functions and duties shall be formulated and reported to the national and municipal-level student loan management centers that have administrative jurisdiction for filing. It is imperative to foster students' awareness of honesty and credibility, establish students' credit files, draw up practical and effective measures and urge borrowing students to repay loan principal and interests in a timely manner, so as to reduce the risks of state student loans. When borrowing students graduate, relevant departments of the school shall arrange for them to go through the repayment confirmation process with the handling bank before performing their graduation formalities and then put information on their loans in their personal files; the said departments shall take the initiative in cooperating with the handling bank in demanding repayment of loans and undertake to provide the handling bank within one year with the valid contact addresses of the first employers of the borrowing students, or, in the case of those borrowing students who have not yet been employed, with the valid contact addresses of their homes.

4. Offer student loan services to students of Shanghai origin going to colleges or universities outside Shanghai

Starting from the autumn of the year 2004, student loan services shall be offered to students of Shanghai origin going to colleges or universities outside Shanghai so as to encourage students of Shanghai origin to go to institutions of higher learning in other provinces and municipalities and effectively help those students of needy families to complete their studies successfully. Students of poor families receiving minimum subsistence security benefits who have registered permanent residence in this Municipality' s and are admitted to colleges or universities outside Shanghai through the nationally unified ordinary college entrance examination may, on presenting their admission notices or college student cards, the certificates of entitlement to minimum subsistence security benefits issued by the social security centers of the neighborhoods, townships or towns where their families have their registered permanent residence and other documents, request and receive loan application forms for students of Shanghai origin at the places designated by the Municipal Education Commission at the appointed time; after passing preliminary examinations, those students shall enter into a loan agreement with the handling bank for loans for students of Shanghai origin, furnish related materials, such as guarantor, as required by the bank and undertake to perform corresponding obligations. The handling bank shall grant loans after examination and approval.

The maximum amount of student loans that can be made available to a student of Shanghai origin going to institutions of higher learning outside Shanghai upon application is 6,000 yuan a year per person, and such borrowing students are entitled to subsidization of interest by the public finance as provided by the State.

Annexes: 1. Procedures of Shanghai Municipality on Management of Subsidization of State Student Loan Interest by Public Finance

2. Procedures of Shanghai Municipality on Management of Special Funds for Risk Compensation for State Student Loans

Annex 1

Procedures of Shanghai Municipality on Management of Subsidization of State Student Loan Interest by Public Finance

With a view to strengthening the management of funds for subsidizing state student loan interest, these Procedures are formulated in accordance with relevant provisions.

1. With regard to state student loans granted after the beginning of the school term in the autumn of the year 2004, 100 % of the loan interest accrued to the borrowing students shall be subsidized by public finance during the period of their schooling and the interest incurred after graduation shall be paid by the students themselves.

The interest rate applicable to state student loans shall be the legal interest rate published by the People' s Bank of China on loans of the same category for the same period and may not float upward or be compounded.

Payment of interest by borrowing students themselves upon graduation shall start from the first day (inclusive of the first day) of the month following the date on which they receive their certificates of graduation; in the case of those borrowing students who complete their studies and receive a transcript but fail to graduate, suspend or discontinue their schooling, or are struck off the school roll, according to relevant school regulations on students' status, they shall begin to pay interest themselves from the first day of the month following the date on which relevant formalities are performed.

2. Budgetary requirements for interest subsidies needed by ordinary institutions of higher learning under municipal administration, vocational colleges run by various trades and private ordinary colleges for state student loans shall be proposed in a unified way by the Student Loan Management Center in this Municipality in the light of the amount of loans requiring interest-subsidies and listed in the annual departmental budget of the Municipal Education Commission upon preliminary examination by the Municipal Education Commission and examination and approval by the municipal finance department.

3. The specific procedure for interest subsidization is as follows: within 20 workdays after the end of every quarter, the handling bank shall prepare for each institution of higher learning under municipal administration a statistical summary of the name list of students enrolled at the institution and actually granted state student loans by the bank, the amount of loans, interest rate, interest and other data and provide the said material to the Shanghai Student Loan Management Center upon its confirmation by the loan management departments of relevant institutions of higher learning.

The Shanghai Student Loan Management Center shall, within 30 workdays after receiving the interest-subsidization application material provided by the handling bank, pay promptly to the handling bank funds for interest subsidization.

The municipal finance department shall, on a quarterly basis, allocate in advance to the Shanghai Student Loan Management Center budgeted funds for state student loan interest subsidization.

4. The Shanghai Student Loan Management Center shall manage the interest subsidization funds from public finance in a special account, use the special funds exclusively for their specified purpose and submit in a timely manner relevant statements to the Municipal Finance Bureau and the Municipal Education Commission.

5. The mode of interest payment by borrowing students upon their graduation shall be determined through consultations at the time when they perform loan repayment confirmation formalities with the bank.

6. These Procedures shall become effective on September 1, 2004. The original procedures shall continue to apply to interest subsidization by public finance of those state student loans under contracts entered into before the above date

Annex 2

Procedures of Shanghai Municipality on Management of Special Funds for

Risk Compensation for State Student Loans

With a view to strengthening the management of special funds for risk compensation for state student loans, these Procedures are formulated in accordance with relevant regulations.

1. Special funds for risk compensation for state student loans are compensations made to the handling bank in line with the principle of "risk sharing" , representing a specified proportion of the amount of state student loans actually granted in the current year. The specific proportion applicable shall be stipulated in the loan cooperation agreement entered into by the Shanghai Student Loan Management Center with the handling bank.

The handling bank, as referred to in these Procedures, means the successful-bidding bank that enters into a cooperation agreement with the Shanghai Student Loan Management Center.

2. Special funds for risk compensation shall be borne by public finance and the institution of higher learning administratively under its jurisdiction on a 50%-to-50 % basis and managed by the Shanghai Student Loan Management Center to be used for their specified purpose only.

3. Budgetary requirements for special funds for risk compensation to be borne by the municipal public finance shall be proposed by the Shanghai Student Loan Management Center in the light of the amount of loans incurred and the proportion of risk compensation and listed in the annual departmental budget of the Municipal Education Commission upon preliminary examination by the Municipal Education Commission and examination and approval by the finance departments.

4. The special fund for risk compensation to be borne by each ordinary institution of higher learning under municipal administration shall be directly withheld by the Municipal Finance Bureau and allocated to the Shanghai Student Loan Management Center every year when it refunds to the said institution the tuition revenue under the scheme of "separate management of revenue and expenditure" ; the special fund for risk compensation to be borne by private and trade-run institutions of higher learning shall be transferred by each institution to the Shanghai Student Loan Management Center before the end of October every year.

5. The special fund for risk compensation to be borne by those institutions of higher learning that have no graduates entering the repayment period in the current year shall be calculated according to the following formula:

The special fund for risk compensation to be borne = the actual amount of loans in the current yearˇÁthe proportion of risk compensationˇÁ50 %.

6. The special fund for risk compensation to be borne by those institutions of higher learning that already have graduates entering the repayment period in the current year shall be linked to the amount default rate of their own students in the preceding school year, and checked and determined by the Shanghai Student Loan Management Center.

7. The amount default rate means the proportion of the amount of loan principal and interest more than 90 consecutive days overdue under the contract in the amount of loan principal and interest that has entered the repayment period.

8. Before the end of September every year, the handling bank shall prepare for each institution of higher learning a statistical summary of the amount of state student loans actually granted and the default rate in the preceding school year (from September 1 of the preceding year to August 31 of the current year) and furnish it to the Shanghai Student Loan Management Center upon confirmation from the institution of higher learning concerned.

9. On the basis of the loan amount actually granted and the default rate provided by the handling bank, the Shanghai Student Loan Management Center shall calculate and determine by weighted average method the special fund for risk compensation for each institution of higher learning in the current year.

10. Before the end of October every year, the Shanghai Student Loan Management Center shall report to the finance department at the same level the amount of special funds for risk compensation to be borne by each institution of higher learning, which shall be taken as the basis for the finance department to withhold and allocate funds.

11. The Shanghai Student Loan Management Center shall notify each institution of higher learning in writing of the exact amount of the special fund for risk compensation to be borne by the said institution, which shall accordingly list it as expenditure under the relevant accounting title.

12. The Shanghai Student Loan Management Center shall, according to the amount of loans actually granted by the bank and in the proportion stipulated in the agreement, determine the special fund for risk compensation actually payable to the bank. At the same time, it shall, before the end of December every year, allocate such funds in a timely manner and in full to the handling bank, as stipulated in the agreement,

13. Every year, the Shanghai Student Loan Management Center shall prepare a final statement of the management and use of the special funds for risk compensation, submit it to the Municipal Education Commission and the Municipal Finance Bureau, with copies for the Shanghai Branch of the People' s Bank of China and the Shanghai Banking Regulatory Administration and inform each institution of higher learning thereof.

14. The Shanghai Student Loan Management Center shall subject itself to the supervision by competent educational departments and finance departments in connection with the management and use of special funds for risk compensation.