BEIJING — China raised its state loan ceiling for students by 4,000 yuan (around $620.2), said the Ministry of Finance on Sept 14.

Undergraduates can borrow up to 12,000 yuan annually in state loans while graduate students can borrow up to 16,000 yuan annually, Assistant Finance Minister Ou Wenhan told a press briefing.

Previous limits were 8,000 yuan and 12,000 yuan, respectively.

In the latest adjustment, students can use the loans to cover their living expenses after paying off their tuition and dormitory fees, said the official.

Launched in 1999, the student loan scheme aims to help financially disadvantaged students pursue their academic ambitions, part of China's efforts to block the intergenerational transmission of poverty and improve equity in education, said Ou.

Interest rates for student loans are 30 basis points below the Loan Prime Rate (LPR) — a market-based benchmark lending rate — of the same class and same term, said the official.

Students do not need to repay the debt during their years of study, and the government covers the interest generated in this period. The maximum loan term is 22 years.

So far, the scheme has issued loans of more than 300 billion yuan and benefited more than 15 million students across the country, said the assistant finance minister.

China last raised the state loan cap for students in 2014. New measures took effect from the autumn semester in 2021.

China's financial aid package for college students consists of scholarships, grants, work-study programs, subsidies, and tuition waivers in addition to loans.