Government to Forgive Student Loans for Multi-Debt Youth... 20,000 Beneficiaries Annually

Ministry of Education, Financial Services Commission, Korea Student Aid Foundation, and Credit Counseling & Recovery Service Sign MOU to Support Youth Debt Burden Relief
'Integrated Debt Adjustment' Implemented to Establish Recovery Foundation for Youth with Multiple Debts Facing Dual Hardships
Up to 30% Principal Reduction for Student Loan Delinquents... Installment Repayment Possible for up to 20 Years

Deputy Prime Minister and Minister of Education Yoo Eun-hye (second from left), Financial Services Commission Chairman Ko Seung-jum, Credit Recovery Committee Chairman Lee Gye-moon, and Korea Student Aid Foundation President Jung Dae-hwa are posing for a commemorative photo after signing a business agreement to support the reduction of youth debt burden.

[Asia Economy Reporter Kwangho Lee] The government is set to forgive loans for young people burdened with debts from various sources, including student loans and financial sector loans. Starting next year, it is expected that debt adjustments for student loans exceeding approximately 20,000 individuals annually (about 100 billion KRW, principal basis) will be possible.

The Ministry of Education, Financial Services Commission, Korea Student Aid Foundation, and Credit Recovery Committee announced on the 22nd that they signed a business agreement at the Korea Press Center in Jung-gu, Seoul, to support the reduction of debt burdens for youth.

This agreement aims to implement measures that have been jointly considered and discussed by related agencies under the shared understanding of supporting youth recovery, recognizing the significant difficulties young people face due to prolonged COVID-19 and employment challenges.

In particular, the signatory organizations plan to establish a debt adjustment system to alleviate the burden on multiple debtors who carry both student loans and financial sector loans, and actively promote the use of this system to young people who need credit recovery support.

Additionally, the Korea Student Aid Foundation and the Credit Recovery Committee will continue to cooperate on scholarship projects supporting vulnerable students, as well as providing credit and financial education necessary to prevent recurrence of youth debt problems and support economic recovery.

Following the business agreement ceremony, the Korea Student Aid Foundation joined the Credit Recovery Support Agreement, allowing student loans to be included as targets for debt adjustment by the Credit Recovery Committee.

Through this, debtors who have overdue student loans and financial sector loans will be able to receive integrated debt adjustment through the Credit Recovery Committee, and are expected to benefit from enhanced debt adjustment support compared to before.

Once integrated debt adjustment is implemented, multiple debtors applying for debt adjustment with the Credit Recovery Committee will have all debt repayment demands, including student loans, suspended and receive unified debt adjustment without a separate application to the Korea Student Aid Foundation.

Furthermore, debtors will receive debt adjustment support such as principal reduction (up to 30%), full waiver of overdue interest, and extended installment repayment periods (from a maximum of 10 to 20 years), which were not available previously when applying for student loan debt adjustment. In addition, the Credit Recovery Committee empathizes with young people who took out student loans for their studies but face repayment difficulties due to employment challenges, and will waive the fee (50,000 KRW per individual) for student loan overdue debtors applying for debt adjustment.

The government expects that through the Korea Student Aid Foundation’s participation in the Credit Recovery Support Agreement, debt adjustment for student loans exceeding approximately 20,000 individuals annually (about 100 billion KRW, principal basis) will be possible from 2022, with an anticipated debt reduction effect of up to 30%.

Deputy Prime Minister and Minister of Education Yoo Eun-hye said, "It is meaningful to prepare support measures that young people can tangibly feel, based on the consensus among various ministries and agencies that the difficulties faced by youth due to COVID-19 and employment challenges must be resolved." She added, "We will strengthen inter-ministerial cooperation through this initiative to alleviate the difficulties of young people and improve their lives."

Financial Services Commission Chairman Ko Seung-beom stated, "In the reality where the job situation for young people is challenging due to the prolonged COVID-19 pandemic, more proactive credit recovery support measures are necessary to prevent young people entering society from falling into the trap of delinquency." He added, "In this context, this agreement is expected to be a great help to young people burdened with multiple debts."

This content was produced with the assistance of AI translation services.