[Exclusive] Government to Provide Universities with 723 Million Won for Tuition Refunds

Possibility of Reduction if Ministry of Economy and Finance Maintains Opposition to Cash Support
Experts: "Even Amid COVID-19... Individual Project Reviews Must Be Thorough"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government is expected to provide financial support of up to 723 million KRW to universities that refund 10% of tuition fees. As public taxes are used for university tuition refunds, the controversy is expected to intensify.

According to data submitted by the Ministry of Education to the office of Kim Young-sik, a member of the Future United Party, on the 2nd, the Ministry of Education allocated a total of 271.8 billion KRW for the tuition refund support project. Initially, 76.7 billion KRW, which had been cut from the University Innovation Support Project and the Junior College Innovation Support Project budgets during the supplementary budget planning process, was restored, and 195.1 billion KRW was newly allocated. Specifically, the Ministry of Education proposed a plan to support 72.3 million KRW per general university (205 schools) and 31.5 million KRW per junior college (149 schools).

Initially, the Ministry of Economy and Finance, the financial authority, opposed support for universities due to tuition refunds, but the National Assembly’s Education Committee passed the related supplementary budget of 271.8 billion KRW on the 29th of last month. This amount was calculated assuming a 10% refund per school and about 400,000 KRW per student.

However, if the Ministry of Economy and Finance maintains its opposition to direct cash support, the project form may change or the budget may be reduced. As demands for tuition refunds grow among university students, the ruling Democratic Party is pressuring the Ministry of Economy and Finance during the supplementary budget review process. An anonymous official from the Ministry of Economy and Finance said, "We adjusted the budget cuts yesterday, and today we are discussing the increases. There is a possibility that some cuts may occur in the Budget and Accounts Committee."

Meanwhile, during the supplementary budget review process, there are concerns that habitual budget increases could worsen national fiscal soundness. If the increases exceed the cuts, additional deficit bonds must be issued. Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki stated, "In difficult times like now, the fiscal scale must inevitably increase, but if the revenue base is not supported, national debt will inevitably rise." According to the report on "Fiscal Total Effect and Management Plan of National Fiscal Operation" submitted by the Ministry of Economy and Finance to the National Assembly, South Korea’s national debt will increase to 935.3 trillion KRW in 2021 after the third supplementary budget.

Accordingly, some argue that thorough review of each supplementary budget project is necessary as large-scale deficit bond issuance is unavoidable. Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "Total fiscal goals such as national debt and total expenditure should be established through fiscal rules. Like conducting preliminary feasibility studies for projects over 50 billion KRW, budget projects above a certain scale need to be thoroughly reviewed."

Professor Kim Tae-gi of Dankook University’s Department of Economics said, "It seems the National Assembly lacks the will to take responsibility for fiscal matters," adding, "It even seems like the budget is being allocated to appease youth in connection with the Incheon International Airport Corporation incident." He further emphasized, "There should be sufficient prior consultation with the government when increasing the budget."