Korea’s young generation has a debt problem

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Korea’s young generation has a debt problem

Young Koreans are struggling with loans, according to the Financial Services Commission on Sunday, because of high educational costs and unemployment.

About 16 percent of Koreans between the ages of 19 and 31 owe money and 11.1 percent have been forced to delay repayment, according to a survey jointly conducted by the FSC and three other government institutions in June of 1,700 young people.

Half the young people surveyed were college students. Half were not in college, which includes people who have already earned college degrees.

The survey showed that non-college students had an average of 683,000 won ($612) in surplus income per month. But 60 percent of the respondents felt they were short of money due to high living expenses and the costs related to finding a job.

While about half of them turned to parents or close relatives for support when they were short of money, 34.5 percent said they had no one to turn to.

College students tended to spend more than they earned, at an average of 521,000 won per month. They were usually dependent on allowances from parents or earnings from part-time jobs. About 51.3 percent of respondents said they ran short of money largely due to living expenses and school tuition, and 75.5 percent of the students paid their tuition with help from parents.

The unemployment rate in this age group was significantly higher than other age groups, according to the report, making it harder for them to handle loans.

According to a September report from the Labor Ministry, unemployment among people in their 20s had hit 9.2 percent. Unemployment for all age groups was 3.4 percent.

Under such circumstances, one out of five young people in the non-college student group had taken out loans in the past and 15.2 percent of them have delayed payment, which will hurt their credit history. Most of them borrowed from banks, but 13 percent borrowed from finance companies or on credit cards, which involves high interest rates.

Young people with loans with interest rates of 10 percent said they chose those types of loans because they needed money fast or had no other option. About 53.2 percent of respondents said they borrowed to pay back student loans, while 20.5 percent needed loans for living expenses and 15.8 percent needed them to pay for housing.

Among college students, 12.5 percent had taken out loans and 4.7 percent had delayed payment. Some 85.9 percent of the college students said they used loans to pay tuition while 14.2 percent said they used them for living expenses.

Based on the research, the FSC is planning to release a list of measures to bolster financial support for young people within this year.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]
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