New College Tuition Systems Proposed

College tuition fees reached the 10.5 trillion won last year. Excluding 1.5 trillion won in scholarships and 830 billion won in student loans, parents paid a total of eight trillion won.

The Grand National Party calculates that the government could cut that eight trillion won figure in half by generating a one trillion won national scholarship fund, expanding the amount of work-study to 480 billion won, creating 800 billion won by allowing soldiers to deposit their salaries and use the money as tuition, 300 billion won by converting student loans extended to lower-income households into sponsorships, and one trillion won by providing 110,000 won of tax credits to those who donate 100,000 won to a private college.

The opposition party is planning to create a three trillion won national scholarship fund. The party explains that the government could initially secure one trillion won from the 800 billion won donated by Samsung Group and 100 billion won worth of dormant bank accounts, another one trillion won by streamlining lax management of budget for various projects, including Brain Korea 21, and yet another trillion won by reducing expenses for managing committees and public relations of the government. The GNP intends to spend one trillion won annually out of the three trillion won on scholarships and save one trillion won as a scholarship fund.

But budget experts say that the plan would lead to reduction of college research expenses and human resource development budget, which are very important. They also point out that if the government tries to excessively adjust projects to secure budgets, this would inevitably cause some side effects.

In the case of utilizing soldiers’ salaries, it takes 800 billion won to raise the salary to 200,000 won a month by 2008. The problem is that the government would have to collect more taxes, and that whether the government can “seize” salaries of all soldiers regardless the will of individual soldiers.

But the experts also say that the tax deduction of 110,000 won for those who donate 100,000 won to college would help vitalize donation. A tax deduction system for political conation is already in place. But it is another question that 10 million people have to donate 100,000 won to create one trillion won, and that how the government would fill the shortage of tax revenue which would be resulted by deducting 1.1 trillion won.

Uri Party lawmaker Chung has proposed a “pre-free college education” which is technically a post-paid system. It seems that Chung used the word “free” to stress the benefits of the proposed system.

The pre-free education system is that the government pays college tuition on behalf of a student by issuing national bonds, the student would be supposed to pay the money back depending on the level of his or her income, after getting a job and securing a regular income source.

Chung argued that the existing student loan system has not been well received because the interest rates reach seven percent and those who took the loan have to pay back immediately after graduating from college.

Chung plans to implement the system for the lower-income bracket from 2007 and expand the application to cover the entire income brackets from 2012.

However, if the system is introduced in 2012, at least 11.5 trillion won, the principal and interest combined, is needed annually for four years until 2012, when beneficiaries would begin repayment.

A bigger problem is that students, who took the loan but failed to get a job or earn a small amount of income, do not have to repay. Apart from the problem of issuing 1.5 trillion won of national bonds for tuition and generating 75 billion won for interest, the possibility of causing moral hazard is raised.

Chung said that the U.K. and Australia has been implementing the system. However, experts point out that, unlike Korea, those countries introduced the system to collect expenses from individuals after the governments’ burden of paying college tuition became too heavy.