[Viewpoint] Hurdles to jump for tuition aid system

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[Viewpoint] Hurdles to jump for tuition aid system

When the Korea Educational Development Institute surveyed expenditure by university students last year, it found that students spent 10 million won ($8,200) a year on average on textbook costs, living expenses and private education fees in addition to tuition.

The high cost of a university education is aggravating the financial difficulties of lower-income and middle-class families, which have suffered recently from worsening income and living conditions due to the poor job market and economic crash.

The “pay back after employment” student loan system the government has now announced is very encouraging in that it could relieve the burden that a university education places on families belonging to the lower middle class, which has been a social issue for years.

The present administration has also established the Korea Student Aid Foundation under the slogan, “Students will not have to give up on their education because they are poor.” The government plans to expand the national tuition aid system according to the needs of students and subject it to continuous review.

This system reduces the social cost of tuition fees while students attend university, and any student on welfare or from a family in the bottom 70 percent income range can receive the benefits.

In addition, since students begin paying back the loans only when they get a certain amount of income after employment, the system has been praised as more advanced than the existing one because the possibility students will default on their financial obligations is reduced. However, for the successful implementation of the new system, the following problems need to be considered thoroughly and policy alternatives need to be developed.

First, securing massive financial resources will be necessary to execute the program, and this must be examined from multiple dimensions. The government, estimating that around 1 million students will receive aid through the new system, calculates that it will cost around 1.5 trillion won over the next five years, and revealed it will secure the necessary funds by issuing bonds through the Korea Student Aid Foundation. However, it must be prepared for an unexpected rise in the number of students receiving loans. The government needs to examine and analyze the methods it will use and on what scale it will increase the government budget as it issues national bonds.

A system to manage increases in university tuition is needed at the same time. There is the danger of increasing the long-term financial burden on students and the government, as the new system can trigger an increase in tuition.

Fortunately, the Ministry of Education, Science and Technology is going to make universities reveal how they calculate their tuition fees to the public starting in 2010, according to the “special law related to the revelation of information by education-related institutes.” The ministry will have to present public guidelines to the universities so that they can transparently explain how they calculate tuition fees using specific and reliable methods. This will lead universities to calculate tuition fees according to rational factors, and reassure students and their families when tuition increases are necessary.

On the other hand, pan-governmental cooperation and continuous examination of support methods are also necessary for the effective implementation of the new system. Some students may take loans but intentionally avoid finding employment to lengthen the deferment period. Or they may select jobs that pay under the standard income rate so they will not have to pay back the loans. The number of such students is increasing in other countries that have an “income-related student loan system” that lets students pay back loans after they get a regular income, causing serious problems.

The government will have to accurately capture not only earned income, but also self-employed income and property income through cooperation with the National Tax Service to prevent fraud. Computerization and standardization of loans and billing is necessary, too. The National Tax Service and other public facilities such as the Ministry of Public Administration and Security, the Employment Insurance and the National Health Insurance Corporation will have to cooperate and systematically prepare support methods.

The “pay back after employment” student loan system is an innovation that the government has launched at an enormous monetary cost to allow students to focus on their studies. We must find a method by which we can operate it successfully regardless of future political change. It will be important to provide a forum for the members of society to discuss specific operational methods and derive a social consensus out in the open, too.

*The writer is a researcher at the Korea Educational Development Institute.

by Lee Jung-mi
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