The number of young South Koreans who earn enough to trigger mandatory student loan repayments but fail to pay on time is rising quickly. Through July of this year, more than 60,000 borrowers were behind on income-contingent student loans, with arrears approaching 90 billion won.
As of July, 60,699 borrowers were in arrears on income-contingent student loans, according to National Tax Service data submitted to Rep. Moon Jin-seok of the Democratic Party of Korea, a member of the National Assembly's Finance and Economic Planning Committee. The unpaid amount totaled 87.351 billion won, or about 1.44 million won per borrower on average.
The income-contingent loan program, introduced in 2010, lends undergraduate and graduate students money for tuition and living expenses. Borrowers must repay through the National Tax Service once their income exceeds a set threshold after graduation.
Arrears have grown every year. The number of delinquent borrowers rose from 36,236 in 2020 to 44,216 in 2022, then to 51,116 in 2023. After topping 50,000 last year, the figure broke through 60,000 in July.
The amount in arrears also climbed from 42.651 billion won in 2020 to 55.19 billion won in 2022 and 66.145 billion won in 2023. It reached 74.034 billion won last year and 81.312 billion won at the end of last year. In just seven months this year, it hit 87.351 billion won, up 7.4% from last year.
Deferrals Surge as Jobs and Incomes Weaken
The difficulty is that the job and income conditions facing these borrowers are also strained. The number of young people deferring repayment — because they have not found work or are struggling financially after job loss, business closure, parental leave or disaster — is rising sharply.
As of July, 9,355 people qualified for deferral either as current students or because of job loss, business closure, parental leave or disaster. The deferred amount was 16.15 billion won. Of that total, 7,655 people deferred because of job loss, business closure, parental leave or disaster, accounting for 12.621 billion won. Undergraduate and graduate students numbered 1,700, with 3.529 billion won deferred.
The trend has been clear for several years. National Tax Service data obtained by the office of Rep. Jung Il-young of the Democratic Party of Korea showed 14,527 borrowers deferred repayment in 2024, nearly double the 7,962 recorded in 2020. The deferred amount over the same period rose about 2.2 times, from 11 billion won to 24.2 billion won.
Cases tied to unemployment, business closure and parental leave grew especially fast. The number of such borrowers rose from 6,871 in 2020 to 12,158 in 2024, while the deferred amount increased by 10.3 billion won, from 9.7 billion won to 20 billion won.
Seizures Near 20,000 as Youth Job Market Sours
A significant number of borrowers became subject to mandatory repayment after their income rose, only to be released from the obligation later as their income fell. That group numbered 110,051 last year. After jumping from 69,100 in 2020 to 107,230 in 2021, it has held near 100,000 each year.
Asset seizures over unpaid loans are also continuing. As of July, 19,244 seizures had been carried out in connection with student loan arrears. By contrast, only 228 cases received tax administration support such as deferral of seizure or asset sales.
Youth employment is deteriorating as well. According to February employment figures from Statistics Korea, the number of employed people aged 15 to 29 fell by 146,000 from a year earlier. The youth unemployment rate stood at 7.7%, the highest since February 2021.
The result is that young people who are supposed to land jobs after graduating and repay their loans are instead running into a shortage of work and shrinking incomes, leaving them unable to keep up with payments.
"The number of borrowers in arrears on student loans has increased significantly, and the pace of the increase is considerable," Moon said. "Since the number of young people who cannot repay because their income is too low keeps growing, we need to revise the standards for deferral and reduction of repayments and prepare employment and income support measures at the same time."
