Rising youth debt due to job shortages and prolonged job search

The number of young people who become 'credit defaulters (or credit delinquents)' due to their inability to repay loans from financial institutions has risen by 25% over the past two years and seven months. This increase reflects the growing debt burden many face while preparing for employment.

As of the end of July, 66,000 people in their 20s were registered as credit delinquents with the Korea Credit Information Service, up from 52,600 at the end of 2021. These individuals have either failed to repay their debts for three months after the loan term ended or have been in arrears for over six months. While the total number of credit defaulters increased by 8% during this period, the rise among those in their 20s was over three times higher. Alarmingly, many young people become credit delinquents over relatively small amounts of debt. Among the young people listed in credit rating agencies for short-term delinquencies, 9 out of 10 owe less than 10 million won. Despite this, being classified as a credit risk results in penalties like suspension of credit card usage and lowered credit ratings, regardless of the debt's size. While these debts could be resolved within one or two years if stable employment were secured, many young people are trapped in bad credit due to the lack of job opportunities. To fundamentally address this problem, the employment situation needs to improve, but the job market is regressing, with the time required to secure a job increasing.

In May of this year, the average time for young people aged 20-34 to find their first job reached a record 14 months, an increase of 1.7 months from the previous year. Moreover, 32% of young people took over a year to find their first job after graduating, and 20% took over two years. The number of youth jobs is also declining. Statistics Korea reports a reduction of 102,000 jobs for young people under 20 in the first quarter of this year compared to the same period last year.

With only 35% of large corporations finalizing their hiring plans for the second half of this year, quality jobs are severely lacking. Many young people, particularly those without financial support from parents, are forced into debt even before they can begin their careers. The government and financial institutions must significantly bolster credit recovery programs for young people facing debt at such a critical stage in life. More importantly, the creation of quality jobs that meet young people’s expectations is essential to address the root of the problem.