[2021 National Audit] Jeonse Loans for 2030 Youth Increased by 58.8 Trillion Won Over the Past 5 Years

[Asia Economy Reporter Lee Kwang-ho] The amount of jeonse deposit loans for the 2030 youth generation has surged by nearly 60 trillion won over the past five years.

According to data submitted by the Financial Supervisory Service to Jeong Un-cheon, a member of the National Assembly's Planning and Finance Committee from the People Power Party, the outstanding balance of jeonse loans for the youth from the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?as of June this year was 88.0234 trillion won, an increase of 58.8496 trillion won compared to June 2017 (29.1738 trillion won).

The proportion of youth loans among the total jeonse loan balance reached 60%. In particular, the outstanding balance of jeonse loans for those in their 20s was only 4.3891 trillion won in 2017 but surged more than fivefold to 24.3886 trillion won as of June this year.

Household loans for the youth are also increasing sharply. The share of youth in total household debt has expanded significantly since COVID-19, reaching 26.9% in the second quarter of this year. The growth rate of youth household debt was 12.8% year-on-year, far exceeding the 7.8% growth rate of other age groups.

Jeonse loans are subject to relatively lower regulatory levels, such as not considering principal repayments when calculating the Debt Service Ratio (DSR). Additionally, various government jeonse deposit support programs for youth housing are being operated, resulting in relatively high demand from the youth.

However, since the youth still have relatively low income and assets, their financial soundness is vulnerable compared to other age groups when it comes to handling excessive debt.

The proportion of vulnerable youth borrowers who are multiple debtors (borrowing from three or more financial institutions) and belong to the bottom 30% income bracket or have a credit score of 664 or below is 6.8%, higher than that of other age groups (6.1%).

The proportion of low-income youth borrowers in the bottom 30% income bracket was 24.1% as of the second quarter this year, nearly twice that of other age groups at 14.4%.

Rep. Jeong said, "The proportion of vulnerable borrowers among the youth is higher than in other age groups, and as debt burdens increase due to interest rate hikes, there is concern that healthy consumption activities may be restricted. It is urgent to closely monitor trends and prepare preemptive management measures for the soft landing of youth household debt."

Meanwhile, President Moon Jae-in instructed at a staff meeting yesterday to prepare measures to help multiple debtors among the youth who are burdened with both student loans and financial institution loans, as difficulties for youth are increasing due to worsening employment conditions amid the COVID-19 crisis.

The government plans to promptly promote an agreement between the Korea Student Aid Foundation, which handles student loan debt adjustments, and the Credit Counseling & Recovery Service, which handles financial institution loan debt adjustments.