SEOUL, Korea, April 30, 2014 (Korea Bizwire) – A bill that would relieve the burden of those who are unable to pay back student loans has passed the National Assembly. The qualifications will, however, be restricted to those whose loans have been in arrears for more than six months as of the end of February 2013. Under the new program, they will be allowed to switch to a new low-cost loan at 2.9 APR from up to 7.1 percent.
The Ministry of Education said on April 29 that bills including a special law on student loan repayment and a law to establish a Korean scholarship foundation have been passed in the legislative body. Accordingly those who have taken out loans prior to a 2010 new student loan program at the rate of 5.8 to 7.1 percent will be able to switch over to loans at a low rate of 2.9 percent.
As of the end of March this year, the total number of borrowers who took out loans until the fall semester 2009 and have not paid back all balances is 558,000, with the volume of balance outstanding at 3.5 trillion won.
Assuming all of them can switch over to the new loans, the savings from the interest payment are estimated at 142.3 billion won a year.
For some of the borrowers who have not paid back principal and interest for more than six months, estimated at about 64,000 as of the end of February this year, the new bill will relieve their interest payments while reducing their principal amount, depending on the borrower’s income level. The education ministry expected that as much as 128.3 billion won will be saved from the loan forgiveness program.
Written by Sean Chung (email@example.com)