[Unpaid Debt in 20s]② "I Have No Money"…750 Billion Won Debt Paid by the Government

Status of Hetsalron Age-Specific Subrogation Beneficiaries
Highest Proportion in 20s at 36%

[Image source=Yonhap News]

In some cases, if an individual cannot repay their debt, the government steps in to pay on their behalf. Here too, people in their 20s stood out. According to data received by Kim Seong-ju, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, from the Korea Inclusive Finance Agency on the 'Hetsal Loan Age-wise Subrogation (government repayment on behalf) status,' the proportion of people in their 20s is the highest.

Hetsal Loan is a financial policy product for low-income individuals. Those with credit scores too low to access regular banks use products like the 'Worker Hetsal Loan' and 'Hetsal Loan 15.' The product targeted at people in their 20s is 'Hetsal Loan Youth,' used by job seekers, university students, and young workers. Borrowers can receive Hetsal Loan financing from banks if the Korea Inclusive Finance Agency guarantees the loan. If borrowers fail to repay the principal and interest, the Korea Inclusive Finance Agency, which provided the guarantee, repays the bank first and then claims reimbursement from the borrower. This is called subrogation. Usually, subrogation occurs after about three months of delinquency.

The total number of subrogation cases in the first half of this year was 64,099. Among them, people in their 20s (22,766) accounted for the largest share. Those in their 30s (17,097) and 40s (13,317) followed at a considerable distance. People in their 50s and 60s combined accounted for just over 10,000. Not only is the proportion high, but the rapid increase is also a characteristic of subrogation cases among people in their 20s. A representative from the Korea Inclusive Finance Agency said, "In just the first half of this year (22,766), the number has already surpassed the total cases in 2020 (20,330). If this trend continues, this year's figures could exceed last year's (41,274)."

When looking specifically at Hetsal Loan Youth, the phenomenon of non-repayment among people in their 20s is even more pronounced. Hetsal Loan Youth is a product that lends up to 12 million KRW per person at an annual interest rate of 3.5% for up to 15 years. Since it targets young people, its interest rate is much lower than Hetsal Loan 15 (15.9%) or Worker Hetsal Loan (11.5%), and even cheaper than regular banks. However, even this is increasingly going unpaid, with cases where borrowers simply ignore repayment and the government steps in to pay.

The cumulative subrogation amount for Hetsal Loan Youth in the first half of this year reached 75.6 billion KRW, with a subrogation rate of 7.3%. Launched in January 2020, Hetsal Loan Youth had a subrogation amount of 500 million KRW and a subrogation rate of 0.2% in its first year, but these figures have risen sharply each year. The higher these numbers, the more loans borrowers have ultimately failed to repay.

Assemblyman Kim Seong-ju said, "As young people in their 20s try to solve their difficult financial situations solely through loans, the number of youths giving up on repaying their debts is increasing. While providing necessary policy loans to young people is important, it is also crucial to create jobs so that they can repay responsibly."