Educational Research Journal

Student Loan Policies in Korea: Evolution, Opportunities and Challenges

2011.第26卷第1期(Vol. 26 No. 1).pp. 99–122

Student Loan Policies in Korea: Evolution, Opportunities and Challenges

Hee Kyung HONG(洪希京)& Jae-Eun CHAE


This article reviews the role of reforms in student loans policies in contributing to the expansion of higher education in Korea from a historical perspective. Since the end of the Korean War in 1950, the development of Korea’s loan system has occurred at a dramatic pace concurrent with the rapid expansion of Korean higher education. The major features of the reforms are as follows: (1) 1950s to early 1980s: Interest-free student loans; (2) 1985–2005: Subsidized interest rates loans scheme; (3) 2005–present: Student loans-backed securities scheme (SLBS); and (4) 2010: Income contingent loans as a supplement to SLBS. The driving forces behind these reforms were social pressures to increase affordability of higher education for all, and the need to secure a sustainable funding mechanism corresponding to the increase in student loans. Although the loans policy was instrumental in expanding higher education in Korea, its effect was mediated by various factors such as the relationship between the funding structure of higher education and private higher education institutions (HEIs), the regulation on university establishment and deregulation of student quota, education fever, and economic conditions. The Korean case demonstrates the complicated dynamics between reforms in the student loans system and expansion of higher education in Korea.

Keywords: student loans policy; higher education expansion; Korea