Stop populism with college student loans

The majority Democratic Party (DP) has rejected the request from the government and the People Power Party (PPP) to resume discussions on a bill aimed at college student loans. The government and the PPP have proposed to narrow the scope of zero-interest benefits for student loans to those from families earning less than 100 percent of the median income.

The PPP’s revision proposes to exempt interest payment on student loans before their employment or during unemployment and parental leave period. But the DP wanted to broaden the scope of the zero-interest benefits to individuals from families earning 200 percent of the median income, or 10.24 million won ($8,016) per month for a four-member household.

Interest on student loans is just 1.7 percent, far below the average loans. The government annually spends 182.5 billion won to cover the losses from the preferential rates. If the DP’s original bill passes, the government must spend an extra 86.5 billion won a year. As the low-income class is already exempt from various loan interests, some question the need for additional exemptions.

The move also can be discriminative for the young without college degrees. They could feel as isolated as the debate about expanding cheap breakfast at university campuses. Moral hazard from interest-free loans could be bred if students choose to use the benefit even when they do not need to seek loans for schooling.

DP chief Lee Jae-myung wants to see through the bill even if the party unilaterally has to pass it. A bipartisanship is impossible with the original outline. It could end up as the Nursing Act which had to move up to the plenary vote directly after it was stalled at the legislation committee beyond the 60-day deadline.

The DP is insisting on the bill regardless of the obvious side effects. The idea was pushed aside under the Moon Jae-in administration when it had been the governing party, due to the risks. The party is suspected of trying to buy back young voters amid a series of its scandals about a party member’s digital coin riches and cash handouts before the national convention. The DP also aims to pass the fiscal burden on the conservative government. If the president exercises his veto once again, the party could use it to attack the ruling front.

The government proposal can save budget and prevent moral hazard so that the benefit can reach students who really need it. The DP must not abandon a chance for cooperation with the PPP. Instead of opposition for opposition’s sake and sticking with its habit of unilaterally passing a controversial bill, the DP must behave prudently and rationally, befitting its majority status, and find a compromise through dialogue and debate.