Repayment Burdens of Student Loans for Korean Higher Education

This study estimates student loan borrowers’ repayment burdens (RBs) in South Korea. Using data from the Survey Report on Labor Conditions by Employment Type and novel administrative records, we estimate life-cycle earnings profiles by income quantile through RIF regression. These estimates are then used to derive RBs for hypothetical borrowers under income-contingent loans (ICLs) and mortgage-type loans, and to evaluate RBs for actual ICL borrowers by matching them with estimated income profiles. The findings suggest that Korea’s student loan system plays a positive role in expanding access to higher education, particularly through ICLs. Many low-income students who benefited from ICLs are later found in the top income deciles. However, raising the repayment threshold irrespective of borrower income may delay repayment and reduce system efficiency. These results underscore the importance of aligning repayment rules with borrowers’ earnings trajectories to ensure both equity and the long-term sustainability of the loan system.