According to Yao, some platforms charge annual interest rates of 20 percent or more, meaning that even a small loan can snowball until the interest becomes too large to repay.

Most students who are unable to repay loans but don't want to tell their parents turn to friends or classmates for help, but some have used other people's personal details to borrow money through other channels, thus getting deeper into debt and further exacerbating the problem, he said.

A few female students even provided nude photos of themselves as security when they borrowed money via illegal channels, putting their safety and reputations in danger, he added.

Feng said the problem needs to be resolved quickly: "In addition to being harmed, some students have even become offenders, blindly believing the people cheating them and helping them to swindle others in the name of buying peer-to-peer services."

New measures

The guidelines issued by the banking regulator and ministries in May are designed to strengthen supervision of on-campus peer-to-peer lenders. Platforms that have not obtained authorization from the banking regulator are now banned from entering the market and existing lenders have been instructed not to provide temporary loans for new clients. They must also ensure that their businesses adhere to the regulations.

The new rules also state that platforms found to have harmed students, such as those complicit in fraud or other illegal activities, must be reported to public security departments or the courts. Meanwhile, colleges nationwide must take greater responsibility by banning unauthorized individuals or platforms from promoting their businesses on campus.

Chu Zhaohui, a researcher with the National Institute of Educational Sciences, said colleges and parents must root out the problem by helping to raise young people's levels of financial literacy.

"There's no need to eradicate peer-to-peer lending on campuses. After all, it has provided students with a convenient way of obtaining money and has met their demands, to some extent," he said. "Under strict supervision, it's possible that these lending platforms could play a more positive role in students' lives at college."

Xiong, from 21st Century, suggested that financial institutions, the education authorities and colleges should work together to launch micro-lending programs to help students overcome temporary financial difficulties, or to start their own businesses.

"A larger number of qualified platforms or channels should be established for students to provide them with choices and ensure they don't feel the need to turn to illegal or unauthorized organizations," he said.

Feng, the prosecutor, urged colleges to provide students with more training, especially in matters related to finance and loans, and help them understand the law by analyzing cases, which could stop them from falling into a vicious circle of debt, excessive interest rates and more debt.

Contact the writers at caoyin@chinadaily.com.cn