A loan company has sued more than 400 university students in China for refusing to repay their loans.

A court in Nanning, South China's Guangxi Zhuang Autonomous Region has been receiving cases this year from an unnamed loan company over contract disputes. The company has accused more than 400 university students of not paying back their loans, Guangxi-based newspaper Nanguo Morning Post reported on Monday.

These cases involve on average 7,000 yuan ($1,045), and the students primarily used the money to buy smartphones, the newspaper quoted Huang Zhige, the judge of the case, as saying.

The mediation would see the loan company settle the lawsuit, waiving claims including interest, commission charges and penalty fees written in the contract, as long as the students pays back the principal and legal costs, according to the report.

Not a single student has appeared in court, and only three students have repaid the loans after mediation as of press time, the report quoted Huang as saying.

Students say they believe that the loans are illegal, and therefore do not need to repay them.

"The students must still repay the principal and interest," Zhao Hua, a Beijing-based lawyer, told the Global Times on Tuesday.

"The law protects a loan when the annual rate is no higher than 24 percent, according to the Supreme People's Court in 2015… Only the portion that exceeds 24 percent is illegal and does not need to be repaid," Zhao noted.

Many university students in China have reportedly run into trouble with student loans over the years. Illegal usuries, scams and loan sharks have become hot topics and have linked the loans to crimes.

Many students gained a sense of independence from their parents after they entered college. Without the proper guidance, they could indulge in student loans, which could involve criminals, Zhao said.

"College students should develop good habits involving money and remain rational when it comes to spending. They should also understand the law," Huang said.