Student loans compounded by dire job market

After Ms. Kim’s father lost his job a couple of years ago, he decided to open his own restaurant business. But after its failure, he soon found himself pressured by debts.

But with a state-run scholarship program, Kim was able to attend college.

“School tuition for a freshman is about 4.2 million won ($3,818) per semester, but I paid 1.2 million won with the scholarship,” she said, now a junior university student.

This year, about three in every five university students, like Kim, are being supported through national scholarship programs. Last year, 58.6 percent of all students benefited from scholarships, an increase of 8.1 percent since 2012.

A program that allows students to repay their loans after landing a job has also been in place for low-income students since 2010.

The current interest on student loans is 2.9 percent, down from 7.8 percent; from 2005 until last year, the government gave out more than 10 trillion won total in student loans.

But in such a desperate job market, most students cannot expect to start paying off their loans after graduation. In Korea, about 3 percent of the national budget is spent on student loans, which has put a big strain on the central government.

According to Kim Byoung-joo, an education professor at Yeungnam University in North Gyeongsang, the government and universities are finding it more difficult to secure financial resources for scholarships.

“It’s time to discuss free national scholarships,” he said.

Last month, the Korea Student Aid Foundation hosted the Fourth International Forum on Student Aid Policy in Incheon, in which scholarship-related institutes from nearly a dozen countries participated, to discuss solutions for the situation.

Cho Young-mu, an official from the LG Economic Research Institute, argued that the country’s current economic situation made more university students dependent on loans.

“Particularly, because of high unemployment among young people, the student loan system can be lax and the government’s finances can be damaged,” he said.

In the forum, some nations showed a different way to run their student loan programs.

In Japan, free scholarships are not provided. Instead, only student loan programs are available, with loan repayments immediately going to other students in need of financial support.

Yoshiyuki Maehata, from the Japan Student Service Organization, said the big challenge for programs was to reduce the delinquency rate.

“It’s significant to determine the difference between those who are having a hard time repaying their loans and who intentionally don’t pay,” Maehata said.

In Australia, tasks regarding student loans programs are often assigned to the Australian Taxation Office. Richard Fogarty, the education and science counselor at the Australian Embassy in Korea, said the Australian government is currently pushing a plan to lower the minimum annual income required for repayment, from 54,000 to 50,000 Australian dollars ($38,438).

[“source – koreajoongangdaily.joins.com”]