What is really driving young Koreans into debt?

In South Korea, a growing number of young individuals are falling into debt, with financial experts attributing this trend to various factors. One such example is Lee, a graduate student who took out a Sunshine Loan to cover her tuition and living expenses. Despite working as a laboratory assistant, she was compelled to quit her job due to health issues, leaving her with limited income.

To make ends meet, she resorted to using a credit card, accumulating debts totaling 17 million won ($12,500). The majority of her debt is in the form of credit card loans, with an annual interest rate exceeding 15 percent on 4 million won.

The financial burden placed on Lee by her credit card loans is immense. While she earns 2.5 million won per month, she allocates 1 million won solely towards interest payments. This situation left her with little room to refinance her debts, as she could not find a suitable loan option due to her current credit level. According to recent data from financial authorities, 1,637,532 people in South Korea have loans from three or more financial institutions.

Among these individuals, 342,690 are in their 20s and 30s, accounting for 20.9 percent of the total.

Speculation has arisen regarding the underlying causes of this debt crisis among young Koreans. Some experts suggest that anxiety over an overheated asset market may be contributing to the problem. As young people grapple with mounting financial pressures, the situation highlights the need for improved financial education and support systems to help them navigate the challenges of student loans, credit card debt, and the broader economic landscape.