hankyoreh

parents take notes while listening to Sungkyunkwan University Dean of Admissions at an application information session at Jamsil Students’ Gymnasium in Seoul on Apr.7. Right

By Kim Ji-hoon and Eum Sung-won, staff reporters

He took out a government loan of 7 million won (US$6,155) while a student at a university in Gyeonggi province in 2006. “Kim,” now 28, had no idea at the time what would happen after graduation. He finished school and found a job in 2010, but his monthly pay of 1.71 million won (US$1,500) was not nearly enough to pay back the loan while also covering the cost of rent and suits for work. He went into default. Six months later, the Korea Student Aid Foundation (KOSAF) began garnishing his wages. Every month, it deducted the 1.2 million won (US$1,060) minimum cost of living and kept the rest, totaling 510,000 won (US$448). It took a year, and a lot of belt-tightening, for Kim to pay back the 6.89 million won (US$6,6060) in full.

In the past four years, the number of young people like Kim has tripled. Unable to pay off their student loans after graduating, they have been facing wage garnishing and other legal action. The ostensible reason for this is the advent of the loan repayment period, which began in the second semester of 2005.

“It takes four years to complete university, and if you add in two years of military service for men, it makes sense that the number of people repaying would be increasing by a large amount from about 2012,” said a Ministry of Education official.

But even employed graduates are often unable to pay back their loans, mainly because they can’t find the high-paying jobs that would give them the means to do so. The placement agency Job Korea conducted a survey of 254 companies last year and found that newly employed four-year university graduates working at SMEs were earning an average monthly salary of 1.95 million won (US$1,710). Statistics Korea put the 2012 average monthly living expenses for a single worker under 34 at 1.63 million won (US$1,430). The numbers suggest what kind of difficulties a newly employed graduate faces in paying back 300,000 to 500,000 won (US$264-440) each month.

According to an analysis of KOSAF materials figures released on Apr. 7 by Rep. Yoo Ki-hong of the Democratic United Party, the number of young student loan recipients subjected to garnishments, litigation, compulsory execution, and other legal procedures roughly tripled between 2009, when there were 659 with a total debt of 3,739 million won (US$3.3 million), and last year, when there were 1,807 with a total debt of 11,082 million won (US$9.7 million). The cumulative total for the four-year period was 4,829 people with debt amounting to 30,151 million won (US$26.5 million).

KOSAF takes legal action such as garnishment against those who are more than six months behind on their loan payments and have a fixed income greater than the minimum cost of living. The next step after garnishment is litigation for compulsory execution, in which the recipient’s assets are seized. The standard income for legal action was 1.2 million won in 2011. Income usually comes as wages from employment but can also be from rent and other asset income.

“Even if [the loan recipients] are employed, it is problematic to have [KOSAF] garnishing wages to get back money borrowed by young people who are forced to take poorly-paid, irregular jobs,” said An Jin-geol, who heads the public welfare hope team for the group People’s Solidarity for Participatory Democracy.

An said KOSAF needed to stop taking legal action and make the socially responsible decision to extend the repayment period or cut interest on the loans.

Last month, the Ministry of Education gave a work report to President Park Geun-hye in which it announced plans to lower the interest rates on government-guaranteed student loans. But a source with KOSAF said the plan would only be able to go into effect in July of this year, adding that the specific scope had not yet been defined.

With more and more loan recipients falling behind on their payments, the number subjected to compulsory execution and other legal action appears likely to increase. Between 2008 and 2012, the number of people unable to repay their principal or interest even once before the monthly deadline increased by 2.3 times from 40,000 to 93,000. The total number in arrears rose from 175.9 billion won (US$155 million) to 504.3 billion won (US$443 million) over the same period. Some 11,647 recipients were delinquent by more than 10 million won (US$8,800), while 39,720 young people were registered as credit risks as of late February for being behind on payments by more than six months.

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