More Graduates Default on Student Loans

The proportion of young Koreans who fail to repay their student loans on time has soared to the highest level in 10 years. 

According to data from the National Tax Service, 44,216 employed graduates missed their student loan payments last year, up 2.6 times from 2018, while the amount of unpaid debt rose 2.7 times to W55.2 billion (US$1=W1,326). That brings the default rate to 15.5 percent, the highest since 2012.

University students are eligible for loans to cover their entire tuition and up to W3 million a year in living expenses, which can be repaid once they find work after graduation. 

The loans were introduced in 2010, when the existing student loan scheme was criticized for requiring debtors to make repayments immediately after graduation, regardless whether they had a job or not.  

The NTS designates debtors who must start repaying their student loans based on their income tax records, and last year, 291,830 people were identified, up 57.8 percent compared to 2018.

But more and more of them cannot pay back their loans even though they are employed. 

"Young debtors who cannot repay their loans should have their debts rolled over and recollection should focus first on those who are financially capable," Minjoo Party lawmaker Yang Kyung-sook said.