Chinese Internet lenders are forbidden to offer loans to university students, said Zhao Jianjun, an official with the Ministry of Education, amid reported irregularities.
Zhao said standard commercial banks are encouraged to provide micro-credit loans to meet the requirements of students still in college.
Some online lenders have exaggerated their services and made false statements to take advantage of those who have limited financial knowledge, he added.
He said the ministry has joined with several other departments to introduce a slew of measures against illegal student loans, and is urging universities to promote financial and fraud awareness among its attendees.
Over the past two years, some online sites have provided high-interest loans to students. In some cases, young women were promised loans in exchange for nude photos of themselves. They were then blackmailed by threats of publishing the pictures if they failed to pay. Some students in debt committed suicide.