Taiwanese Students Facing Mountains of Debt

More than 940,000 Taiwanese are still paying their student loans, and 33,000 of them have requested deferred payment because their monthly salary is less than NT$30,000 (approximately US$927), according to the latest statistics released by Ministry of Education (MOE).

The data shows that 319,254 students applied for student loans in the 2014 academic year, including 17,590 high school students and 301,664 college students.

The students who receive student loans account for 22.5% of the 1.34 million college students in the country. Of the students with debt, 59,768 are enrolled in public schools while more than 240,000 are studying in private universities.

MOE has to allocate about NT$3 billion (approximately US$92.8 million) of its annual budget to subsidize the interest of the student loans.

Although students have to start paying back their student loans a year after graduation or completing military service, people who are from low-income households or have a monthly salary less than NT$30,000 (approximately US$927) can apply for deferred payment for a year for three times at most.

Ko Tzu-hsiang, president of Lunghwa University of Science and Technology, says that many students of private vocational schools are from low-income families. In Lunghwa University, 30% of the students apply for student loans, which is a very high figure according to Ko.

Under MOE regulations, universities have to allocate 3% of their tuition income to fund scholarships for students with financial problems, but Lunghwa has raised the number to 6% because there are too many financially challenged students in the school.

Chang Lung-chieh, a senior student of a vocational college in Taipei, says he has borrowed NT$53,000 (approximately US$1,639) per semester throughout his college years. His loan has amounted to NT$420,000 (approximately US$12,988). He currently works part-time four to five days a week.

“Student loan puts me under pressure, but it also prompts me to work harder,” Chang says. [quote translated]

Kao, a kindergarten teacher who graduated last June with a student loan of NT$280,000 (approximately US$8,659), says she is scheduled to start paying back her loan in July, but it is too heavy of a burden for her.

Kao works 10 to 12 hours a day with a monthly salary of NT$32,000 (approximately US$990). She says she originally planned to save NT$15,000 (approximately US$464) a month to pay off the debt in two years, but it has just been too difficult to carry out.

A netizen, responding to a news article on Facebook, shares his thought on Taiwan’s student loan system. He says the system has created a vicious circle.

The netizen explains that in Taiwan, students who get good grades in the college entrance exam apply for public schools since the schools have better reputation and resources. Many students go to private schools because their families do not have enough resources and money to offer them quality education.

Yet, private schools charge more tuition fees than public schools, so many students from low-income families in private schools have to request student loans. With less financial support from their families, these students also have to shoulder the burden of debt after graduation, which creates an obstacle for them to improve the financial state of their families.

Student loan debt is a major problem around the world

Taiwan is not the only country facing the issue of student loan debt.

In 2014, 1.33 million Japanese students applied for student loans and the amount of unpaid money reached more than NT$26 billion (approximately US$804 million). Many college graduates not only bear the burden of student loans, but also remain unemployed in the first few years following graduation.

According to a survey conducted by Japan’s Ministry of Health, Labour, and Welfare, 31.6% of 2000 people under 34 who have received student loans say that their debt has delayed their decision to get married and 21% say the debt has diminished their willingness to have a child.

In Korea, student loan debt has shot up to more than US$10 billion in the first half of 2015, according to the state-owned Korea Student Aid Foundation.

Many Korean college students are worrying about paying off their student loans and finding a job that can support them financially after graduation.

In an interview with Channel NewsAsia, a Korean student says, “The economy is getting worse and my parents’ income is limited. They say they will lower university tuition fees, but so far it’s remained the same. Private university tuition fees are around $3,400 per semester on average; there’s no way a student can pay that.”

Some analysts say that the rising student loan debt combined with high unemployment could lead to problems for Korea’s economy.

In the US, student loan debt currently stands at over US$1.2 trillion, more than 60% of which is held by the bottom quartile of households.

According to Edvisors.com, on average, an American graduate in 2015 shouldered US$35,000 in student loan debt and about 40 million Americans have not paid their student loans on time.

Mohamed A. El-Erian, chairman of President Barack Obama’s Global Development Council, wrote an article on US student loan debt issues on the World Economic Forum last November.

In the article, El-Erian wrote, “The return on investment in education is falling, because the economy is growing slowly and changing rapidly, making it difficult for some graduates to secure employment that takes advantage of their knowledge and skills. Universities are often slow to adapt their curricula to the economy’s needs, while new technologies and business models are exacerbating the winner-take-all phenomenon.”

El-Erian continued, “If the return on investment in education continues to decline, the servicing of student loans will tend to crowd out other consumption and investment outlays, especially given that student debt has considerable seniority in the capital structure. In this scenario, the risks of default and delinquency would rise, along with financial insecurity and general instability, all of which would exacerbate the inequality trifecta (income, wealth, and opportunity).”

Edited by Edward White

Sources:
TNL
China Times
Liberty Times
Apple Daily
“Surging student loan debts a concern for slowing South Korean economy” (Channel NewsAsia)
“Does the US have a student loan problem?” (World Economic Forum)
“Undergrads Around the World Face Student Loan Debt” (US News)