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New Student Loan Program Raises Doubts
By Choe Yun-A  |  younaa90@hanyang.ac.kr
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[306호] 승인 2009.12.01  
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  In 2008, university's tuition inflation doubled compared to the inflation of commodities price; students are marching on streets arguing that they are now living in the "10 million won tuition generation." On July 30, 2009, the Ministry of Education announced a new tuition policy called Income Contingent Loans (ICL).
   ICL targets those who unfortunately have to leave school temporarily because they are unable to afford the tuition and those who cannot pay back the interest of their student loans after they borrow money. Basic livelihood recipients and students from households in the lowest to the seventh income decile are eligible for ICL.
   Starting from the first semester of 2010, students can borrow money without worrying about paying it back as long as they receive overall grade C or above each semester. It allows lower-income families to pay the money back in a maximum period of 25 years after they get a job. Currently, students are required to pay the interest immediately after borrowing the loans for their tuition, and they have to pay off the loans during a set period of time employed or not. However, the new student loan program raises doubts whether it is really helpful to students.

What the Government Has to Say
   The new student loan program is improved from the former tuition regulation in following ways. It allows students to pay the principal and the interest as soon as they land jobs and earn income, and the interest is collected in proportion to the employed students' income. The government issues national notes and Korea Student Aid Foundation pays for them in order for the government to afford the loans. However, the new student loan program brings some other problems.
   With ICL, the nation raises more money-lenders since every student could indiscreetly ask for loans. Another problem is that there is no ceiling to control universities to raise the amount of money for the tuition. Even if the government launches the new program, it still would not cut tuition by half as President Lee Myung-bak promised to halve college tuitions prior to his election.
In response to the problem pointed out, the government tries to explain the issue. "Although the amount of money that the government supports to basic livelihood recipients with interests decreases, ICL allows those who use student loans to repay the amount once they get hired and collect income. Financial burden for students in need would get lower, and the government considered allotting repayment amount and interest after being employed would be more helpful," the officer at Student and Parent Support Division of the Ministry of Education, Science and Technology said.
   Regarding on controlling ceiling for tuition, the officer also added, "the reason why ICL does not include the tuition ceiling control is because it is dangerous to standardize tuition for universities. Every university has diverse plans and projects, and each department and division needs different amount of money to teach students; therefore, the government cannot intervene them and control their tuition and indiscriminately freeze tuition for universities."

Still Existing Problems
   Even though the government insists that ICL is an proper program for students related to their tuition problem, there are voices against it arguing ICL needs more improvements. According to An Min-suk, a member of Korean National Assembly, "President Lee's new student loan program is an appropriate attempt to aid students to go on studying without concerning about how to finance tuition. However, without controlling ceiling, the fundamental problem would not be solved. Also, the new system could be only successful when there are many jobs available in the future so that those who are in debt could repay the whole amount of money."
   An also added that "based on the government's national budget for 2010, the budget to support Korea Student Aid Foundation will increase by 300 billion won. But the government at the same time plans to reduce the budget for other kinds of national scholarships by about the same amount. In the end, the new program is not in fact supportive for university students." For now, the government expects the repayment rate up to 90 percent with about 11 million students who would use the new student loan program. This accounts about 55 percent of 19.7 million university students. However, according to the statistics of National Assembly introduced by the member An, the expectation of repayment rate is too high; in reality, it would actually be around 70 percent, and indiscreet usage of the program would raise national debt.
   The biggest problem of the new student loan program is that financial aid for the interests to the lower-income bracket is missing in the program. Formerly, the government provided financial aid of 4.5 million won to the lowest income group with no interest and it also waived from 1.5 percent to four percent for interests. If the government suggested the new student loan program to help students afford tuition, then it also has to extend interest waiver.
 
What Do Students Think About the New ICL?
   Lee Kyo-young, the former president of the Educational Committee of Hanyang University and a student at Division of Social Sciences, majoring in Political Science and Diplomacy, pointed out some major issues that the government is still not covering through this program. She said, "President Lee Myung-bak proposed to halve tuition in his campaign, and now launched ICL in order to cover up his promise. If ICL does not have any kinds of problems and could be a practical aid to students, then I would be acceptive with the government? decision. However, the new student loan program clearly has some illogicality."
   Lee also said, "the government is using citizens', especially university students' unconcerns to the present tuition system. In order not to suffer from disadvantages of the new ICL but to solve the basic problem, university students need to wake up and countermove. On campus, Educational Committee is getting signatories from students to give awareness about the problem and to argue what university students really want." According to the survey held to 392 Hanyangians, the majority of survey respondents thought it was necessary to improve current student loan program. About 70 percent of the respondents answered that they thought there needs to some changes on tuition and on the current student loan program. When they were asked what they thought about the contents of ICL, 36 percent answered they disagreed ICL to be taken effect but would agree if the government would extend the range of recipients and increase the amount of budget allotted to financial aid. 33 percent of the respondents, on the other hand, agreed to ICL but they only agreed when ICL would add control of ceiling for university tuition.
   Overall, more than a half of students participated in the survey agreed that ICL which the government suggested currently is not enough to aid students and solve tuition problem; in other words, the government is required to compose changes and improvements from the current one to cover up still existing problems.

Possible Suggestions
   The entire freshmen class in the next year will benefit from the program, while students in the upper grades will be able to choose between the present existing and new systems. According to the Office of Planning at Hanyang University, the school is yet to make a decision on how much the tuition would be for next year. The discussion on next year's tuition and possible solutions is ongoing, and the school is planning to announce the next year's tuition during mid-January.
How and when can students enthusiastically study without worrying about how to afford school? In the case of the other countries around the world, there are some models Korea could follow. The member of National Assembly, An said, "in Germany, France and some other European countries, the governments provide 100 percent of tuition to university students because their proportions of national budget to support education are much greater than that of Korea." In case of United Kingdom, Australia and New Zealand, they practice pay back system very similar to Korea's ICL, but those countries have higher national education budget than Korea. Korea allocates only four percent national budget to education and the ratio of students who go on to a higher stage of education is 85 percent which is higher than those countries.

To Truly Study First and Worry About Paying Later
   The problem current government has to solve is not tuition itself, but employments. ICL currently allows students to repay loans within 25 years in maximum from the time of earning income. However, students who use ICL program would only be left in debt for a long period of time if the government does not resolve the unemployment problem. Therefore, the government needs to aware of the point and put more efforts to create more jobs for university graduates.
Another possible solution is, according to the Educational Committee, tuition should be priced in proportion to students' family average income. Students from higher-income family could pay more amount than those from lower-income family. Student and Parent Support Division at the Ministry of Education, Science, and Technology announced that, "the Ministry is still in the process of finalizing financial details through coordination with relevant authorities, including the income standard for a student's repayment initiation, repayment rates, and incentives for repayment and funding sources."

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