Study Now, Pay Later
New Lending System Marks Change in Right Direction
Voters who thought President Lee Myung-bak reneged on his campaign promise to halve college tuitions are only half right.
The government's new student loan program, which sets no ceiling on lending and, more importantly, allows graduates to delay repayment until they land jobs and earn income, may not cut tuition by half but will enable about half of university students to go on studying without worrying about how to finance it ― at least for now.
This is a laudable change in the right direction, considering how skyrocketing tuition has driven many students into all kinds of unthinkable cases of moonlighting, including prostitution, and has even led to suicides. Even in less tragic cases, the number of financial delinquents fresh from college has increased to almost 14,000 under a current system that calls for starting repayment after a short grace period.
President Lee was himself extremely needy during his college days and had to have a range of side jobs from garbage collector to street vendor, and is right to ensure that no students are left behind because of poverty. A college diploma is not an option but an obligation in this society with an ever-widening educational divide, along which social status inherited between generations.
For the ``income contingent loan'' plan to take a firm root, however, the government ought to be quite careful in working out concrete action plans. Most importantly, the new program should not create only bigger borrowers with longer grace periods.
This means the education ministry should prevent colleges and universities from raising tuition to take advantage of freer and more substantial lending, by periodically setting ceilings on school bills, which are already set high enough ― 4.2 million won for humanities students and 7.4 million won engineering majors ― as is the case in some Western countries, including Britain and the Netherlands.
No less important is to prevent lending institutions from exploiting the long-term loans by applying undue levels of interests, which will require the government to keep interest on student lending lower than other loans.
Of course, finding financial resources of 7 trillion won a year is hardly a simple matter, but the educational policymakers will have to decide over the long term which university system the nation should choose ― the European state university system which is almost free of charge, or the American private university system, which forces schools to operate like business enterprises bent on making investments and profits. If the mixture of the two systems is inevitable, we hope the European portion will be predominant.
A fundamental condition for the new system's success will be ― once again ― how many jobs the nation can create in the future, which will require the incumbent administration to also rethink many of its economic policies.