Financial hardship combined with soaring tuition has taken its toll on college students, forcing them to turn to private moneylenders. The grim reality shows that a growing number of poor collegians have no other choice but to mortgage their future without hope.
It is irritating to read a report by the Financial Supervisory Service (FSS) that nearly 50,000 students owe a combined total of 80 billion won ($75.6 million) to 40 major moneylenders as of June. The number of the student borrowers surged by 57 percent from a year earlier, while the amount of loans jumped by 40 percent.
The significant increases were attributed to expensive tuition that averages on 7.6 million won per year. The sum is the second highest among OECD member states. The difficult economic conditions have also put strong pressure on parents and their children attending colleges. Borrowing money from private moneylenders raises the likelihood of students becoming credit defaulters. Moneylenders impose interest rates of up to 40 percent.
Students find it impossible to get bank loans. It is also not easy for them to get government-guaranteed student loans with low interest rates due to strict credit qualifications and the cumbersome lending process.
The default rate for the loans extended by private moneylenders has climbed to 14.9 percent. More worrisome is that the rate is likely to go up further. Once students become credit defaulters, they cannot lead a normal life after graduation. They can hardly get a decent job due to their bad credit records. In short, they have no future.
The debt problem has emerged as a social issue that cannot be tackled by individual borrowers or their parents alone. Student borrowers may face grave consequences unless universities and the government take radical measures.
The first thing to do is to prod universities to slash tuition by a sizeable margin in order to relieve students’ financial burden. Lawmakers and politicians of both governing and opposition parties should no longer shout an empty slogan of cutting tuition in half. They must take substantial steps to help poor students.
Colleges and educational authorities must then provide more scholarships to students from low-income families. It is also urgent to reform the student-loan program so that those in a financial pinch can easily borrow on better terms. Students are the future of the country. Don’t let them fall prey to loan sharks.