Loans are double-edged sword for college students

Zheng Dexing died on March 9, 2015.The college student from Henan Province committed suicide after accumulating loans worth 589,500 yuan (91,000 U.S. dollars) to pay for his gambling addiction.

Yang Bo, a junior in southwest China's Guizhou Normal University, wanted to go on vacation to Guangdong Province, so he resorted to loan of 5,000 yuan.

"The loan makes it a lot easier to travel," Yang said. "I just pay 500 yuan or so monthly to pay it back."

More and more college students are turning to loans to supplement their lifestyles. To apply, students must disclose certain information about themselves and their parents for the loan to be verified.

Should a monthly repayment be missed or late, the interest rate is increased.

"It took me less than an hour to complete the application online," said Zhang Zeming, a freshman from east China's Fujian. "For new applicants, the loan is interest free."

Students from over 50 universities were surveyed by Capital Campus Press Union in January, of the respondents, 63 percent have applied for loans online, 85 percent of which did not want their parents to be involved.

"It feels awkward for me to ask my parents for that much money because I am student," admitted Zhang, who applied for a loan to buy a laptop.

Apart from travel and shopping, loans have also been used to start or invest in businesses. Li Hailang, a college student from Ningxia, used his loan to open a restaurant near his school.

"Online loans can stimulate consumption," said Li Yuansheng, an economics professor at Fujian Normal University. "College students tend to spend more on digital devices, but lack the spare funds, this is where loans can help."

Also, from a lender's perspective, college students are a huge market, with a preference for short-term purchases, according to Kang Jun, professor at Hunan University.

However, loans are not all about benefits. Take the sad story of Zheng Dexing, he is just one of a number of students that rely on loans to live beyond their means.

In some cases, students are borrowing more money to repay outstanding loans, resulting in increased compound interest.

This was the case for Lin Lin, who bought an iPhone 6s with an installment loan and has 4,000 yuan yet to repay, putting a huge strain on her weekly budget.

"College students are a special group," said Fu Jian, a lawyer from Henan. "They are immature when it comes to money management and budgeting."

Li Yuansheng, the professor from Fujian, concurred. "They need to understand that loans should only be used for smaller purchases, or else they will struggle."

As for the websites that offer these loans, there are calls that the terms and conditions should be made clearer.

"The websites should be more aware of their social responsibility, rather than encouraging irrational spending," Kang Jun suggested, referring to the fact that the platforms have made it too easy for students to register and get money.

"They should also consider expanding their interest rates based on the customers they target, especially college students," he added.

In addition, universities and parents have been encouraged to teach students better spending habits.

"At the end of the day, parents should talk with their children and prevent unnecessary loans from happening," Fu Jian stressed.

"What students truly rely on are their families and schools, not loans."