50,000 collegians owe loan sharks W80 bil.

By Kang Seung-woo

Some 50,000 college students owe around 80 billion won ($75.68 million) to private curb lenders due to high college tuition and worsening youth unemployment, the nation’s financial watchdog said Thursday.

Making matters worse, the loans by the students have been picking up speed, while their default rate has been deteriorating.

According to the Financial Supervisory Service (FSS), a total of 47,945 students borrowed 79.46 billion won from 40 private lenders as of the end of June, meaning each owes about 1.6 to 1.7 million won.

Last year’s reading was 56.58 billion won from 30,494 students, which show 40.4 percent and 57.2 percent increases, respectively, over a year.

With student loans increasing at a fast pace, bad debts are also on the upswing.

Overdue loans escalated from 6.66 billion won to 11.81 billion won in the cited period, with the default rate soaring by 3.1 percentage points to 14.9 percent, higher than the overall default rate of 7.2 percent at the 40 major lenders.

Due to the upside trend in the number of students relying on curb loans, there are rising concerns that some of them might have become credit delinquents, who fail to repay debt for three months or more.

Statistics back up the speculation, as the number of defaults among college students has been on the rise ― from 3,785 in 2007 to 26,000 in 2010 ― according to the Ministry of Strategy and Finance.

The FSS attributed the growing undergraduate borrowing to soaring college tuition and youth unemployment.

Among the borrowed money, 33.68 billion won was spent on tuition and 19.68 billion won on living expenses.

According to figures from Statistics Korea, tuition at colleges and graduate schools grew by around 30 percent between 2005 and 2010, which nearly doubled the expansion in consumer prices.

Youth unemployment continues to be a headache for policymakers, with the jobless rate remaining at 7.6 percent for those aged between 15 and 29 in June.

In the face of these serious difficulties, the FSS has required private money lenders to refrain from extending loans to college students who have no ability to repay debts, while planning to provide them with government-run low-interest student loans.

In addition, the watchdog is set to monitor if there are any illegal debt collections by the lenders.