The growing number of students being driven to suicide due to student loans is causing widespread public outrage in China.
In recent years, stories of students taking their lives after falling prey to loan sharks have increased in local media and social networking platforms.
Government regulators stated that these online lenders, which charge exorbitant interest rates, have recently been targeting university campuses, capitalizing on the youth’s materialism.
According to students, lending company marketing agents are often stationed in universities, with advertisements plastered within campuses. The heavy marketing in schools only disappeared last year after a spate of student suicides began causing a public uproar.
Loan applicants are only required to provide their contact details, as well as those of family and friends to avail easy credit. As lenders provide credit on very easy terms, these students often end up accumulating multiple unpaid debts with interests and penalties spiraling out of control.
According to Reuters, monthly compounded rates based on loans offered in 2015 were 1 to 2%, which stack up to an annual rate of 13 to 27%. Late payments incur penalties of at least .5% daily or 517% per annum.
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These lenders often go to great lengths to force the students to pay up and collecting debt payment is done through intimidation by violent thugs.
“It was terrifying,” a college student who owed 70,000 yuan ($10,550) said. “Some boys were tied up and beaten.”
A university student in Beijing said he was forced to drop out of university after being harassed by debt collectors. He explained that he just wanted to buy an iPhone 6s last year so he was lured into initially borrowing about 10,000 yuan ($1,500).
A year later, he has accumulated over 200,000 yuan ($30,100) in debt from two dozen online lenders as he ended up taking one loan after another to pay back interest and penalties.
“I was reckless. I wasn’t thinking about the consequences,” the student said.
Another university student named Zheng Dexing started similarly, but in the end, the pressure became too much to bear for the 21-year-old. After sinking in debt of almost 590,000 yuan ($88,900) from a dozen online finance companies to sustain his gambling habit, he decided to kill himself.
“Don’t come collect my body — it’s too humiliating,” Zheng wrote in a message sent to his father before plunging to his death from a hotel building last year.
In response to the mounting cases of suicides brought about by the uncontrolled borrowings, the Chinese government suspended the operations of the online lenders in late June, preventing the lenders from granting new loans to university students.
While multiple online lenders appeared to have already complied with the suspension, some are reportedly still targeting students and are going after the existing loans that have not been collected.
Online lending firms reportedly began to thrive in 2013 as they were not required by the government to secure lending licenses. In a report by state news agency Xinhua in March, the industry has grown to 80 billion yuan ($12 billion) by 2016.