Even After Getting a Job, Unable to Repay Student Loans... Delinquency Rate Highest in 10 Years

Last Year's Student Loan Delinquency Amounts to 55.2 Billion Won

The proportion of young people who fail to repay their student loans on time even after employment is rapidly increasing.

According to data submitted by the National Tax Service to Yang Kyung-sook, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, the number of mandatory repayment targets for income-contingent student loans last year was 291,830.

Last May, near Samgak Station in Yongsan-gu, Seoul, the National University Student Council Network and university students were marching toward Seoul Station after holding a press conference to address the financial difficulties faced by university students.
[Photo by Yonhap News]

The income-contingent student loan system provides university students with loans covering full tuition and living expenses (up to 3 million KRW per year), and repayment is made based on income level after earning income. The National Tax Service designates borrowers as mandatory repayment targets if their annual income from the previous year exceeds the repayment threshold.

The existing student loan system required interest payments even before income was generated, and the repayment period was fixed regardless of employment status, which created a loophole that made young workers default on their debts. To address this, income-contingent loans (ICL) were introduced in 2009.

Recently, the number of income-contingent loan users has surpassed that of general repayment loan users. The number of general repayment loan users was 161,591, a decrease of 10,425 (6.1%) from the previous year (172,016). In contrast, ICL users increased by 12,101 (5.1%) to 249,502 from 237,401 the previous year.

Last year, the amount of overdue student loans was 55.2 billion KRW, 2.7 times the 20.6 billion KRW recorded in 2018. The number of defaulters also rose 2.6 times from 17,145 in 2018 to 44,216 last year. The delinquency rate was 15.5% by amount, the highest since 17.8% in 2012.

The total amount of student loans last year was 356.9 billion KRW, a 67.6% increase from 212.9 billion KRW in 2018 over four years.

The rate of increase in overdue amounts is much steeper than the growth rate of total student loans. This indicates that even after finding jobs, many young people are not in a position to repay their student loans. It can be interpreted as meaning that the number of young people experiencing economic difficulties has increased.

Despite the favorable employment conditions continuing since early this year, employment indicators for the youth remain stagnant. According to the August employment trends released by Statistics Korea, the number of employed youth (aged 15?29) decreased by 103,000 compared to the same period last year, marking the tenth consecutive month of decline. The employment rate also fell by 0.3 percentage points to 47.0%, the only age group to experience a decrease.

Assembly member Yang Kyung-sook emphasized, "We must not allow the proliferation of young defaulters burdened with debt before they even take their first step into society," adding, "Repayment should be deferred for economically struggling debtors, and collection efforts should focus on defaulters with a high likelihood of payment."

Another statistic shows that young people starting out in society are carrying heavy loans. A survey conducted last year by the Youth Foundation found that about 6 out of 10 young people (59.6%) had experience with loans. Among them, 3 out of 10 (23.8%) had loans ranging from 10 million to 50 million KRW, and 8% had loans between 50 million and 100 million KRW.

Regarding the reasons for borrowing, student loans such as university tuition (31.7%) were the most common, followed by rental deposits for jeonse or monthly rent (25.3%), and emergency living expenses (20.2%).

This content was produced with the assistance of AI translation services.