[Inside Chodong]A Society Without Hope Without a Breakthrough... Only Youth Loans Are Surging

[Image source=Yonhap News]

The 2021 National Assembly audit is quickly approaching its conclusion. This year’s audit was dominated by the ‘Daejang-dong’ issue, which sucked in attention like a black hole ahead of next year’s presidential election. However, it also had a positive function by allowing access to information that is usually difficult to obtain through the powerful rights of lawmakers to conduct on-site investigations and request data. Personally, the issue that caught my attention the most was ‘youth loans.’ Until now, I had only a vague sense that there was a red flag, but this time I was able to confirm the exact numbers directly.

Recently, youth loans have been rising sharply. According to data submitted by the Bank of Korea to Jeong Il-young, a member of the Democratic Party of Korea, household debt among the 20-30 age group stood at 485.545 trillion won as of the end of June this year, accounting for 26.9% of the total. In particular, the growth rate of household debt among young people was 12.8% compared to the same period last year, far exceeding the growth rate of other age groups (7.8%).

The rapid increase in jeonse deposits due to rising housing prices is the biggest burden on young people. The loan type that increased the most among the youth was jeonse loans (21.2%), accounting for 25.2% of their total debt, which is three times the proportion of jeonse loans (7.8%) in other age groups. According to data received by Jeong Un-cheon, a member of the People Power Party, from the Financial Supervisory Service, the outstanding balance of jeonse loans for the 20-30 age group surged from 29.1738 trillion won in 2017 to 88.0234 trillion won as of the end of June this year. This is an increase of 60 trillion won over five years.

Youth struggling with debt are resorting to borrowing to repay existing loans. According to data submitted by Jin Sun-mi of the Democratic Party from the Financial Supervisory Service, the proportion of multiple debtors among people in their 20s exceeded 12.4% as of the end of June this year. This means that one out of every ten young people in their 20s is a multiple debtor. In particular, the number of 20-somethings juggling loans from five or more financial institutions increased by 3.18% compared to the end of last year. This sharply contrasts with the overall age group, which saw a 2.93% decrease. Furthermore, as bank loan regulations have tightened, young people are being pushed toward secondary financial institutions. As of the end of June this year, the outstanding balance of unsecured loans from secondary financial institutions for people in their 20s increased by 16.44% in just six months, surpassing 6 trillion won. Before COVID-19, in 2019, the balance increased by 9.12% over one year, but in 2020, when the pandemic began in earnest, it surged by 20.13% in one year, more than doubling the previous year’s growth rate.

As debt begets more debt, the number of young people choosing bankruptcy is gradually increasing. According to the Supreme Court’s data on bankruptcies among people in their 20s, submitted by Shin Hyun-young of the Democratic Party, the rate was 0.1% from 2016 to 2019 but increased by 10.5% in 2020, after the onset of COVID-19. Notably, the increase rate among men in their 20s was as high as 47%.

According to data submitted by Min Hyung-bae of the Democratic Party from the Korea Inclusive Finance Agency, as of August, the number of subrogation cases for policy guarantee products (Worker’s Sunshine Loan, Sunshine Loan Youth, Sunshine Loan 15, Sunshine Loan 17) among people in their 20s reached 21,216. Subrogation refers to a third party repaying the debt on behalf of the borrower. It usually occurs when the principal and interest are overdue or during credit recovery procedures such as workout, individual rehabilitation, or personal bankruptcy. The number of subrogation cases among people in their 20s is rapidly increasing compared to other age groups. Considering that there were 17,436 subrogation cases among people in their 20s in the past year, this represents a 21.6% surge. Other age groups have not yet reached their previous year’s numbers.

The 20-30 youth generation is just taking their first steps into society. Is it really normal to burden them like this? Instead of simply criticizing them for reckless borrowing and investing with all their assets, it is time to fundamentally reconsider a society where there is no hope without such a gamble. Fortunately, the presidential election, where opinions can be gathered, is also approaching.