🚨 Student Loans: Rising Youth Debt and Education Cost Relief Policies

Today Korean Social News | 2025.07.18

📌 Student Loans Break 2 Trillion Won for First Time in 9 Years…Young People Burdened with Debt Before Entering Society

💬 Youth student loans are rapidly increasing again amid economic recession. Last year, student loans exceeded 2 trillion won, with the proportion of general repayment methods increasing quickly. The number of overdue borrowers also increased by 14% compared to the previous year, exceeding 20,000 people. During the same period, job postings for young people decreased by more than 20%, making employment more difficult. Young people preparing to enter society are carrying the debt burden of student loans. This has led to active discussions about improving the student loan system and support measures for young people.

Summary

• Student loans are a financial support system provided by the government to reduce the burden of university education costs.
• Recently, loan amounts have exceeded 2 trillion won, significantly increasing the debt burden on young people.
• Combined with employment difficulties, repayment burdens and overdue payment problems have emerged as social issues.

1️⃣ Definition

Student loans are a system where the government or financial institutions lend money to students for tuition and living expenses needed during higher education such as university. Students can borrow money without interest burden or at low interest during their studies, and repay according to their income after graduation and employment.

This policy ensures that people don't miss educational opportunities due to financial difficulties, and aims to improve society's human capital through individual educational investment.

💡 Why is this important?

• Provides higher education opportunities regardless of economic background, achieving educational equality.
• Contributes to economic growth and social development through individual human capital investment.
• Helps young people prepare for entering society by reducing education cost burdens.
• Helps stabilize household economies by reducing education cost burdens on parents.

2️⃣ Main Types and Features of Student Loans

📕 Types of Student Loans

• Student loans are divided into two main types. The main types are:

  • Income Contingent Student Loans (든든학자금) are repaid after graduation when income is generated.
  • General Repayment Student Loans start repayment immediately after graduation.
  • Loan limits are determined based on income level in connection with national scholarships.
  • They are divided into tuition loans and living expense loans based on purpose.

• Income Contingent Student Loans have specific features. Main features include:

  • No interest is charged during studies.
  • Repayment begins when annual income reaches 15 million won or more after graduation (2025 standard).
  • Repayment amounts are determined proportionally to income, reducing burden.
  • Maximum repayment period is 35 years, after which remaining balance is forgiven.
  • Repayment can be deferred if income is low or absent.

📕 Increase in General Repayment Student Loans

• General repayment student loans have been rapidly increasing recently. Main status includes:

  • As of 2023, general repayment loans account for over 40% of total loans.
  • Income contingent loan limits are restricted, so many use general loans to cover shortfalls.
  • General loans charge interest even during studies, creating a heavy burden.
  • Repayment starts immediately after graduation, creating pressure even during job preparation.
  • Interest rates are 1.7%~4.5% annually, lower than market rates but still burdensome.

• Continuous increase in loan amounts is becoming problematic. Main factors for increase include:

  • University tuition increases annually, raising loan demand.
  • Rising living costs increase applications for living expense loans.
  • Increased graduate school enrollment extends education periods and loan duration.
  • After COVID-19, household income decreased, increasing dependence on student loans.
  • Rising youth unemployment makes post-graduation employment difficult, increasing repayment burden.

Major Problems with Student Loans

1. Increased Repayment Burden: Young people face significant debt burden from early stages of entering society
2. Rising Default Rates: Rapid increase in repayment defaults due to employment difficulties and low wages
3. Insufficient Loan Limits: Cases where loan limits are insufficient compared to actual education and living costs
4. Lack of Information: Students' lack of understanding about loan conditions and repayment methods
5. Social Inequality: Continued differences in educational opportunities based on economic background

3️⃣ Student Loan Status and Social Impact

✅ Domestic Student Loan Status

• Student loan amounts are rapidly increasing. Main status includes:

  • In 2023, new student loan disbursements reached 2.05 trillion won.
  • About 40% of all university students use student loans.
  • Cumulative loan balance exceeds 15 trillion won and increases annually.
  • Average loan amount per person is about 15 million won.
  • Loan usage rates among regional private university students are higher than Seoul-area universities.

• Overdue payments and repayment burdens are emerging as social problems. Main issues include:

  • As of 2023, the number of overdue borrowers exceeded 21,000, a 14% increase from the previous year.
  • Default rates within 5 years after graduation are highest at 8.2%.
  • Repayment ability is declining due to falling employment rates and stagnant starting salaries.
  • Overdue payments lead to credit rating drops, restricting future financial use.
  • Long-term defaulters increasingly consider personal rehabilitation or bankruptcy applications.

✅ Impact on Young People

• Economic burdens during early social entry are increasing. Main impacts include:

  • A significant portion of first job salaries is used for student loan repayment, restricting living standards.
  • More people are delaying or giving up life plans like marriage or home purchases.
  • 'Vicious cycles of debt' occur where people take additional loans to repay student loans.
  • Willingness to challenge entrepreneurship or career changes tends to weaken.
  • Young people reporting mental stress and depression are increasing.

• Educational choices are also being affected. Main changes include:

  • More people choose universities with lower tuition considering loan burdens.
  • Students giving up or postponing graduate school admission are increasing.
  • Reluctance to invest in additional education like overseas study or language programs is appearing.
  • Some students consider taking breaks or dropping out due to economic burdens.
  • Situations arise where students can't focus on studies due to spending much time on part-time jobs.

4️⃣ Related Terms

🔎 Deundeun Student Loans

• Deundeun Student Loans are student loan systems repaid after employment.
• Deundeun Student Loans are the brand name for Income Contingent Student Loans provided by Korea Student Aid Foundation. This is an income-linked loan system where students receive loans without interest burden during studies and start repayment when income reaches a certain level after graduation.
• Main features of Deundeun Student Loans include: First, no burden with interest-free during studies. Second, repayment starts when annual income exceeds 15 million won after graduation. Third, repayment amounts are determined proportionally to income, reducing burden. Fourth, repayment can be deferred when income is low or unemployed. Fifth, remaining balance is forgiven after maximum 35 years of repayment.
• Deundeun Student Loans are representative policy tools guaranteeing the right to education without economic difficulties, currently used by many university students. However, loan limits are restricted, making it difficult to cover all actual education costs needed.

🔎 National Scholarships

• National Scholarships are income-linked scholarship systems provided by the government.
• National Scholarships are scholarships provided differentially by the government based on income level to reduce university students' tuition burden. Unlike student loans, these are support funds without repayment obligations, where lower household income receives more support.
• Main types of National Scholarships include: First, Type I are basic scholarships provided differentially according to income brackets. Second, Type II are scholarships provided in connection with universities' own efforts. Third, Multi-child Scholarships are additional support for students from multi-child families. Fourth, Regional Talent Scholarships are scholarships encouraging local students to settle in their regions.
• National Scholarships operate in connection with student loans. Students first receive scholarships, then can receive student loans only for insufficient portions, effectively reducing overall education cost burden. However, middle-class families still have limited scholarship benefits while maintaining high loan dependence.

🔎 Korea Student Aid Foundation

• Korea Student Aid Foundation is a government agency managing student loans and scholarships.
• Korea Student Aid Foundation is a public institution under the Ministry of Education established in 2009, dedicated to supporting university students' study funds. It aims to expand higher education opportunities and reduce education cost burden by overseeing student loans, national scholarship payments, and scholarship programs.
• Main functions of Korea Student Aid Foundation include: First, operating Income Contingent Student Loans (Deundeun Student Loans). Second, managing general repayment student loan operations. Third, handling national scholarship payments and management. Fourth, operating various special scholarship programs. Fifth, performing borrower repayment management and overdue borrower management.
• Korea Student Aid Foundation manages the entire process from loan application to repayment through online systems, providing various counseling services for easy access by students and parents. However, more systematic management measures are needed for increasing loan amounts and overdue payment problems.

5️⃣ Frequently Asked Questions (FAQ)

Q: Will taking student loans cause disadvantages when seeking employment later?

A: Generally, student loans themselves don't directly disadvantage employment. Student loans are recognized as legitimate investment for education, and most companies don't view them negatively. However, if overdue payments occur and credit ratings drop, this may affect employment in financial sectors. Also, some public enterprises or civil service hiring processes conduct credit checks, so long-term overdue payments or bad credit status can be disadvantageous. But student loans being normally repaid or deferred don't cause problems. Rather, receiving education and building expertise through student loans often helps with employment. The important thing is to manage loans responsibly after receiving them and establish sincere repayment plans after graduation.

Q: What should I do if student loan repayment becomes difficult?

A: There are several support measures when student loan repayment becomes difficult. First, for Income Contingent Student Loans (Deundeun Student Loans), repayment is automatically deferred if annual income is below 15 million won. You can apply for repayment deferral when unemployed or have low income. For general repayment student loans, you can receive repayment deferral for up to 10 years when facing economic difficulties. You can also extend repayment periods to reduce monthly payments. Special deferrals are available during military service, disaster situations, or medical treatment for illness. When repayment becomes difficult, it's important to request counseling from Korea Student Aid Foundation in advance. Finding appropriate solutions through prior consultation rather than after overdue payments is advantageous for credit rating management. It's also important to plan for resuming normal repayment when income recovers.