Penalty Rates-the Ex-post Mechanism Of The National Student Loan In China

National student loan is initiated by the government while operated by thecommercial banks, educational department and universities, the purpose of which is tohelp college students who from poor families to get a loan. With the character of hugeamount and wide range, national student loan increases the opportunities the poor studentaccess to further education, and provides a guarantee for the students to obtain a faireducational platform. After many kinds of reforms, high loan default is still the severestobstacle, which even causes national student loan to break off.This paper introduces the concept of penalty rates as the ex-post mechanism ofnational student loan, which aims to reduce the loan default. By using dynamic gameframework, analyzing the discrete model and continuous model, demonstrate the penaltyrates mechanism helps improve the existing system. Lending mortgage loan withequilibrium penalty rates increase the incentives of rational students to defray principaland interest on schedule and decrease the banks’ dunning costs, basing on national studentloan is a kind of credit loan.In the process of solving the equilibrium penalty rate, the paper also refute the ideathat penalty rates should set as big as possible. It demonstrates penalty rates should risewhen the expected amount of mortgage loan decline. Besides, penalty rates should risewhen the application of mortgage loan put off. In additional, in order to ensure theeffectiveness of ex-post mechanism, the distribution of mortgage loan must be found outto determine the shortest years that the credit record should be kept.