Salvage the debt-ridden twentysomethings

Our society must prevent the youths’ debt from building up to social insecurity.

Korea’s twentysomethings are drowning in debt. According to Financial Supervisory Service (FSS) data released by Rep. Yang Kyung-sook — a Democratic Party (DP) lawmaker and member of the National Assembly’s Strategy and Finance Committee — the delinquency rate of those in their 20s with mortgage loans averaged at 0.39 percent at the end of the third quarter. Compared with a reading of 0.14 percent in the same period two years ago, the ratio has nearly tripled.

The extraordinary increase suggests that many twentysomethings are suffering from their debt obligations after recklessly borrowing for leveraged investment in housing when interest rates were low. The delinquency rate of the age group overwhelms that of older adults, nearly doubling the 0.2 percent for those in their 30s and the 0.23 percent for people in their 40s. The overdue amounts to 140 billion won ($106 million), up more than 50 percent from 90 billion won in the same period last year.

Mortgage loans are not the only issue stifling people in their 20s. The delinquency rate on credit loans for them reached 1.4 percent at the end of June, doubling 0.7 percent from a year earlier. They face punitive interest rates and disruption in financial activities. The young can fall into a vicious debt cycle when they are just entering their career.

The spike in delinquency rate among those in their 20s raises doubts about lending integrity. The surge in delinquency rate in loans suggests loopholes in the regulation of the debt service ratio. The credit card bubble burst in the early 2000s occurred after the heedless issuing of credit cards to young people. Mobile banking service players like KakaoBank also require more scrutiny.

Many youths are turning to individual bankruptcy schemes. According to the Credit Counselling and Recovery Service, as many as 4,652 people in their 20s filed for a workout program in return for relief from their debt principal, doubling the number in the first half of 2018. If the young are immersed in debt, society has no future, as they cannot dream of getting married or having children. Our society must prevent the youths’ debt from building up to social insecurity.