State-subsidized Student Loan Repayment Breach Analysis

National student loan system (NSLS) has achieved remarkable success after nine years’ rapid development. It alleviated the urgent needs of poor students to some extent.But there are still many problems to system design and implementation, because China’s NSLS is still at the exploration stage.This paper firstly described the theory and characteristics of the NSLS, the theoretical basis of implementation and its development in China. Then, based on the"situation" determined by the national student loan policy and the situation of the game,this paper used incomplete information dynamic game model to analyze the related acts between the students’"high rate of contract breach" and the banks "loan unwilling". It arrived at a solution. It is the best choice for student loan acts that "student repay capital with interest, the bank agreed to loan". But the reality of operation was usually the opposite of the optimal situation. The main reason is that China’s current personal credit system has not yet been established, credit constraints and prevention system of credit risk is immature. In addition, commercial banks have not established effective loan-tracking system to the student. And student mobility is huge after graduation. It leads that the bank can’t be timely informed of the whereabouts of students and even the students can’t be found. So, the bank is concerned about the huge cost of the prosecution. China’s fine system is not perfect. Under the circumstance of imperfect fine mechanism, the banks’punishment measures can not constitute a confidence threat to students in the game. More and more students take the initiative to deviate from the sub-game Nash equilibrium to breach contract. And even if the bank can recover the loan, the level of effectiveness is also lower than the sub-game Nash equilibrium’s level. This paper used signaling game model to analyses the target confirmation problem of national student loan. It analyses the option of poor student and the revenue of the two sides of student and universities by comparing the symmetric information and asymmetric information situation. It was found that asymmetric information led to the adverse selection of students who provided the material. Finally, this paper designed two types of signaling game models, that is "no differences in the cost of signal transmission game models" and "differences in the cost of signal transmission game models". It was used to solve the national student loan confirmation of the target group under the circumstance of asymmetric information. This article concluded that only there’s different cost of signal transmission in different types of students, the signals can display types. It could solve the problem of national student loan confirmation on the target group under the circumstance of asymmetric information.Finally, this paper proposed strategies to further improve NSLS, such as legal and mechanisms design, personal credit system construction, poor student identification system, national student loan financing construction, national student loan securitization and so on.