The younger generation, entrusted with shaping the future of South Korea, is currently ensnared in the grip of poverty. According to surveys conducted by entities such as Statistics Korea, 40% of Korean youth find themselves in the category of impoverished individuals, with incomes falling below 50% of the median. The reduction in job opportunities due to employment cuts has left the youth deprived, and the widening wealth gap has further robbed them of fair competition opportunities. Unlike child and elderly poverty, youth poverty tends to be wrongly attributed to individual issues. It is crucial now to recognize that youth poverty is not merely an individual concern but a societal problem that needs acknowledgment in order to rekindle the flames of South Korea’s future growth. ChosunBiz has examined the challenging lives of these diminishing youth, exploring potential alternatives to reignite their aspirations. [Editor’s Note]
Amid prolonged economic challenges, more university students are turning to student loans. In 2022, the Korea Student Aid Foundation noted a significant increase, with 411,093 students utilizing loans, up by 1,676 from the previous year. The student loan utilization rate also rose by 0.2 percentage points to 12.9%. Notably, 249,502 students opted for employment-based repayment, indicating a growing trend to use future income as security.
Heo In-hoe (pseudonym, 29), an office worker, sought financial relief through personal rehabilitation. Without parental support and facing financial challenges, Heo started a life in Seoul, initially managing with part-time work. However, the burden of fixed expenses led Heo to take out a student loan for tuition, eventually resulting in overdrawing from a bank account. Working as a salesperson post-college proved insufficient to handle increasing debts, leading Heo to seek court assistance as the debt rose from 20 million to 30 million won.
Yet, like Heo, more young individuals are finding it challenging to repay student loans. According to a report by the National Assembly Special Committee on Budget and Accounts, the Korea Student Aid Foundation reported an unrecoverable amount of 27.489 billion won in its student loan portfolio in 2022, a sixfold surge from four years ago. The count of individuals facing difficulties in repaying student loans in 2022 reached 4,778, marking a sevenfold increase from 679 individuals in 2018.
Although the student loan interest rate has been fixed at 1.7% since 2021, providing some relief compared to other loan rates, there’s concern. With the recent increase in the benchmark rate, young individuals, already burdened by higher interest rates on other loans, are finding it challenging to repay student loans. The main reasons for failure to repay student loans are personal rehabilitation and personal bankruptcy. In 2022, 3,454 individuals, constituting 72.3% of the total, received debt relief through personal rehabilitation. Personal bankruptcy was the second most common reason, affecting 954 individuals (20.0%). Unlike personal rehabilitation, which clears records upon completion, personal bankruptcy leaves a record for five years after discharge.
