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Educational Challenges - Financial Aid

By giving actual awards, REAP explores what is most effective for financial aid

China has made great achievements in rural education over the past decade—especially in compulsory education. Compulsory education in China ends with grade 9. In the past five years fiscal input by the national government has made grades 1 to 9 almost free. This effort—and other factors—have contributed to making compulsory education universal. Almost all children between the ages of 7 and 12 are in school. Girls attend elementary and middle schools at rates almost equal to boys (Hannum, Wang and Adams, forthcoming).

While there have also been progress in promoting higher education—both high school and tertiary education—it is not because of reductions in tuition and fees. At the same time that tuition and fees began to be reduced for elementary school and junior high, they were raised for high school and college/university. School costs are not trivial for middle-class urban parents; they are extraordinarily high for families in poor rural areas.

How high are high school tuition and fees? According to a recent survey by REAP, high school tuition, room, board and other fees in rural areas is around 4,000 yuan per year. High school students who are from remote villages and townships almost invariably have to live at school. This means that three years of high school can cost a poor family 12,000 Yuan or more. For a family that is living at the poverty line, this means that it takes about 15 per capita incomes to pay for high school.

Sending a child to university for four years can cost more than two times high school. When all expenses are added up, university costs in China can reach 10,000 to 12,000 yuan per year. To pay for four years of college, a poor family living at the poverty line must borrow and save more than 60 years of per capita income.

Click Financial and Information Constraints on Rural High School Students Seeking Higher Education in China ( 274.24 KB ) for a summary of REAP's 2007 survey results

Calculating the benefit side of secondary and tertiary education

Despite these high expenses, almost any family in China—urban or rural, even parents of households from the poorest, most remote parts of China—would like to send their child to high school and college. The decision to pay out this amount of money, however, depends on an assessment of the benefits. Several factors make the decision to go to high school difficult to make:

  • When a person decides to go to high school, the cost is higher than the "out-of-pocket expenses, since he/she is able to enter the work force and earn a wage; the foregone earnings can be substantial.
  • The wage that a student can earn after attending high school (if not continuing to university, or to a technical training/professional school) is about the same as the wage he/she would earn if he/she entered the work force after junior high (Li et al, 2004).
  • The probability of passing the university entrance exam in poor, rural areas is less than 15 to 20%. In fact, a recent study found only 12% of randomly selected poor students in Northern and Southern Shaanxi passed the university entrance exam in 2008 (Liu et al, 2008).
  • Vocational/technical training schools exist, but they are even more expensive to attend than university; and until recently, at least, there was little financial aid.

You have been randomly selected
for a scholarship

Poor parents of bright children very much want their children to get the education that they never had. However, sending their child to high school becomes a very hard decision. As seen, it involves many tradeoffs and a lot of uncertainty. Poor families (like all families) desire to maximize their household's lifetime income and want to improve the livelihood of their children. Even when it comes to educating their child, they must confront the cold realities of the economic calculus.

When a family does decide to send their child to high school and beyond, they often have to take extreme measures to support the child. To pay the fees of high school—the training ground for university entrance—often requires poor families to sell scarce assets. The family must often borrow from relatives, friends and neighbors. Increasingly, families must rely on high interest loans from local money lenders. All of this sacrifice (plus the foregone wages) is required for taking a course in which there is only a 1 in 3 or 1 in 4 or less chance of success.

Not surprisingly, high school enrollment rates in poor rural areas are low. The wide gap between rural and urban educational attainment endures. And, this is at a time that the country—given its need to increasingly compete in more skilled wage industries—needs its workforce to be better trained.

What about financial aid for high school and college?

Scholarships and financial aid for high school students are almost non-existent in poor, rural areas. At universities across China, the limited scholarships available pale in comparison to the numbers of students who ask for support. According to a recent survey by REAP, only 2 percent of high school students received financial aid. More than 20 percent applied (Sharbono et al, 2007).

The case for university funding is different. There is increasingly more aid and scholarships available today than there was five years ago. It is claimed in some universities that whoever requires financial aid can get it.

Award winners from Mizhi,
Shaanxi Province

While this may be true in some places (perhaps the most elite schools, such as Peking University and Tsinghua), it certainly is not true generally. In fact, a recent study by REAP has shown that university scholarships are unevenly distributed among China's universities. There are substantial numbers of scholarships—both from government sources and from private donations—at the centrally-funded and most prominent universities. Unfortunately, these institutions have the fewest number of poor, rural students. In contrast, the schools with larger numbers of student from poor, rural areas are far from having enough aid. When we told university administrators what many officials in Beijing are saying, their response was to laugh—a bitter laugh. It is not true that whoever needs financial aid can receive it.

Even if it were true, the fact is that students from poor rural universities do NOT know this. REAP found that there was enormous mis-information about school financing. Students are not aware of the resources that are available for them. They also believe that it is more expensive to go to better schools in the large municipalities than to relatively lower-quality schools in regional cities. In fact, in most cases, the reverse is true. In fact, there are programs to help poor, rural students with their funding needs. The problem is, rural students do not know about them and often are unable to take advantage of them.

There also appear to be problems with the design of many financial aid programs. For example, banks are supposed to provide educational loans. Few students, however, have been able to take advantage of them. Banks are unwilling to give guaranteed student loans because the guaranteed student loans are not well guaranteed by the government. Many rules have arisen to try to overcome perceived (though unproven) problems of repayment. In particular, students now can only apply to the banks in their home towns. Unfortunately, poor, rural students are by definition from poor, rural areas. The banks in these areas are among the least willing and able to make these loans.

In addition, China's government scholarship and grant funding has evolved so all of the funding is done through the university system. This, of course, means that students can not get access to aid until they enter the university. In fact, in most universities, first year students are not awarded scholarships until well into the second semester. This not only means families have to find some way to finance the first year of college, it also means that there is a lot of uncertainty. When students are making their choices of where to go to college and what to major in, they do not know their financial aid package. As a result it is possible that they make decisions in this environment of uncertainty that might be suboptimal in terms of their college/major choice. In other words, poor, rural students may distort their college choice and choose to go to a normal or military school where the cost is lower even though they are not interested in a career in education or the military. Such distortions will impose costs on the students, their families and the nation as a whole.?

Making a well-informed decision in regards to what university to attend is almost impossible for a poor family, given their own financial limitations and the systematic information constraints. Ultimately, higher education in China is a private, pay-as-you-go system. Students must base their decisions on whether their families can come up with the required amounts on their own, an impossible task for many. That is, unless changes can be made to the way the system works: at the high school level; at the college and university level; and for students going to vocational/professional training schools.

Other Aid Challenges


Vocational/Professional Training (Dazhuan):

The discussion above reveals disheartening statistics. Due to the extremely competitive nature of college admission exams, limited space in the university system and the relatively poor quality of schooling that students from poor, rural areas have received, less than 15 to 20% of the high school students from China's poor rural areas are able to pass the university entrance exam to continue their education (Liu et al, 2008). Even though they have shown themselves to be extremely motivated, hardworking and talented enough to have made it through secondary school, the large majority of poor, rural students graduating from high school have little other choice but to go find a job in the unskilled labor market. Despite the academic abilities and appealing personal attributes they have demonstrated, in nearly all cases their low economic status becomes virtually entrenched forevermore.

Vocational/professional school training is a potentially important means of providing new opportunities to learn skills valued in China's labor market. Vocational education (or technical education) and professional schools are seen by many as a means of servicing the large numbers of students now not accommodated by the current university system. Yet, while vocational schools are increasingly common for different trades, they are predominantly private. In many cases, attending vocational training/professional schools is even more costly than China's level-1 and level-2 universities.

Currently, financial aid for vocational schools, although growing, is still minimal. There are both private and increasingly more government programs available, but little is known of them. The methods of allocating aid are unclear. Their availability is still far from certain. The terms and conditions may make use the of financial aid restrictive. The rate of return to vocational training and professional school education is unknown. Thus, the result in rural areas is a familiar one: vocational training is an opportunity, but only if your family can afford to pay for it, under the status quo.? It is clear that opportunities still are not available to all. There is evidence that young women are the least likely to receive such advanced training.

Early Childhood Education

A recent REAP survey reveals that less than 40% of young children in poor rural areas are attending any kind of early childhood education program or center (Luo, Rozelle and Zhang, 2008), despite the many long-term benefits "early childhood readiness" holds for formal educational attainment and, long-term, for social and economic success. In China's large and affluent urban areas, attendance rates are 90%. Low preschool attendance in poor areas is seen even though the costs may not be high. However, the centers that do exist are private and, like other forms of non-compulsory education in rural areas, little if any private or public financial aid is made available to encourage and to enable poor families to enroll their children. (see Educational Challenges – Early Childhood Education, for a detailed description of this important issue,)


To alleviate the needs of poor, rural families for assistance for meeting the spiraling costs of education, REAP is implementing its own scholarship programs and partnering with others to evaluate their 'financial aid programs.'

The objectives of this work are two-fold:

  • Help promising students by providing them financial aid, and
  • Learn what the impacts are of the different programs—both the short-term and long-term effects—and draw policy lessons from this evidence-based, 'real world-based' experiments so policy makers are able to more effectively change the ways they are doing some things and scale up the things that they are doing successfully.

So what are we doing?

As of the summer of 2008, we have 6 financial aid experiments under way.

  1. University Scholarships
    Hurdle Grants? (IET/CORE Scholarship Program)
    Scholarships with and without Strings Attached – Promoting Community Service? (Cyrus Tang Foundation's CaringHearts Program)
  2. High School Scholarships
    If High School Were Free? (SOAR Foundation)
  3. Middle School and High School Scholarships
    Scholarships with Strings Attached – Promoting Community Service?
  4. (Cyrus Tang Foundation's CompassionateHearts Program)
  5. Vocational Training Vouchers
    Giving Her a Second Chance (in negotiation)
    (GAP Foundation Vocational Training and Internship Program)
  6. Preschool Vouchers
    Giving Rural Children in China a Head Start: Providing Families Pre-school Vouchers to Improve the Educational Readiness of Pre-school Age Children in Rural China


  • Hannum, E., M. Wang and J. Adams. (forthcoming) "Urban-Rural Disparities in Access to Primary and Secondary Education: Recent Trends." Invited contribution to One Country, Two Societies?: Rural-Urban Inequality in Contemporary China, edited by Martin K. Whyte, Cambridge, MA: Harvard University Press.
  • Li H., W. Liu, N. Ma, J. Zhang. 2004 "Does Education Pay in Urban China? Estimating Returns to Education Using Twins" Discussion Papers, Chinese University of Hong Kong, Department of Economics.
  • Liu, C., S. Rozelle, L. Hongbin, B. Sharbono. 2008. "Is a First Year University Scholarship Enough? Results from an Experiment on Exam Performance, University Enrollment and University Choice in Northwest China" Working paper, Stanford University.
  • Luo, R., S. Rozelle, L. Zhang. 2008. "Availability of Early Childhood Education Centers in Northwest China and Attendance by Rural Children" Working paper, Stanford University.


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