Shanghai's Donghua University has barred students who own mobile phones or other "extravagant" items, including MP3 players and computers, from applying for a national tuition grant of 6,000 yuan (£390) a year.
Applicants found to own offending items will have to either stop using them or give up their grants. But the university has made a concession for students who are shortly to graduate and need mobiles for job hunting.
As the grant was intended to support study, money "should be spent on study or daily necessities rather than any other extravagances", said Wang Kebin, director of Donghua's student affairs department. The rule ensured that grants went to those who really needed them, he said.
The ruling, which came into effect at the start of the current semester, has encountered opposition from students and parents and criticism from other universities. Fudan University, one of Shanghai's leading institutions, condemned the move as meddling in students' lives.
Shen Minghua of Fudan University's student affairs office said: "What if the MP3 player was sent by a relative as a gift or students used their own part-time job income to buy mobile phones?"
Donghua stands by its decision. So far, however, only one student has been removed from the list of students eligible for grants for refusing to give up his mobile phone.
The policy is symptomatic of increasing concern over student finances in Shanghai. The national support loan, a government-backed bank loan for students, has a limit of 6,000 yuan per student. Even those eligible for a university grant find it difficult to make ends meet as tuition fees and accommodation costs rise.
"When the tuition (fee) was 5,000 yuan, the national supporting loan was a great help for poor students," said Yao Junjun of the Shanghai International Studies University loan office, "but I'm worried about whether it can still be as helpful now that the tuition cost has increased to 10,000 yuan."
The loan term is eight years, so that students have to repay the whole amount just four years after completing their studies. Despite the Government's backing of the national support loan, banks are increasingly wary of lending money to students who may well be unable to make their repayments.
The university has also begun to send students' loan records to their future employers after graduation, to encourage prompt repayment. Starting this semester, Donghua students who apply for a subsidised bank loan are required to sign a statement and take an oath promising to repay on time.
Loan recipients must also complete up to 200 hours of volunteer work while at the university.