A hotly-debated move to cut college tuition by half is a wonderful idea for students, especially for those from poor families. But many people are still skeptical about the proposal made last month by Rep. Hwang Woo-yea, the ruling party whip.
South Korea is one of the world’s most expensive countries in terms of education expenditure. During K-12 schooling, private tutoring is the main culprit, while staggering tuition is another burden for students in college. The best way to solve this problem is to let students study without worrying about financial pressures. But the stark reality shows how tricky it is to do so.
College tuition has more than doubled in the past decade, depriving students from low-income households of their educational opportunity. What a great loss of human resources to a country that lacks natural resources and depends heavily on human capital for economic growth.
More and more students have become a victim to student loans. According to the Korea Student Aid Foundation, the number of students defaulting on college loans spiraled to 25,366 last year from a mere 670 in 2006. The overdue payments amounted to 304.6 billion won ($282 million) in 2010, up from 65.7 billion won ($60.8 million) four years earlier.
The surge was attributed to the fact that banks have rushed to extend loans without considering students’ ability to repay them. But the underlying cause of the problem is that colleges and universities have increased tuition too excessively, forcing pupils to take on all the costs of school operations. Students have frequently staged rallies to demand a freeze or cut in tuition. Bureaucrats, lawmakers and politicians have vainly tried to put a cap on tuition hikes.
Against this backdrop, the government introduced an income-contingent loan (ICL) program last year to enable student borrowers to pay back their loans after graduating and landing a job. The “study now and pay later” program appears to be a viable solution to the worsening default problem. But it cannot be the right prescription for the looming debt crisis for students. It only defers the payment burdens until after graduation.
The new program carries a relatively high interest rate, raising concerns that borrowers may be forced into debt for the rest of their life. It is often described as a ticking time bomb that could explode after graduation. Taxpayers might be forced to pay for the defaults unless the government defuses the situation properly. We hope that the tuition cut proposal will be put into action not only to solve the brewing debt woes but also to raise human capital for the future.