Financial Services Commission Supports Up to 30% Principal Reduction for Student Loan Delinquents

[Asia Economy Reporter Song Hwajeong] Borrowers who have defaulted on student loans will receive debt adjustment support such as up to 30% reduction of the principal and full exemption of overdue interest.

The Financial Services Commission announced on the 31st that the amendment to the "Enforcement Decree of the Act on Support for Financial Life of the Underprivileged" was approved at the Cabinet meeting.

This amendment was prepared to enhance the efficiency of integrated debt adjustment for student loans and financial institution loans, which the Credit Recovery Committee has been implementing since January this year. In November last year, the Credit Recovery Committee signed a Credit Recovery Support Agreement with the Korea Student Aid Foundation to support integrated debt adjustment for student loans. Through integrated debt adjustment, borrowers who have defaulted on student loans can receive expanded debt adjustment support compared to before, such as up to 30% reduction of the principal and full exemption of overdue interest.

The amendment includes the Korea Student Aid Foundation as a mandatory party for the Credit Recovery Committee's Credit Recovery Support Agreement. Previously, the Korea Student Aid Foundation was not a mandatory party under the law, but with this amendment, it is explicitly designated as a mandatory institution.

Additionally, the amendment allows the Credit Recovery Committee to directly request overdue-related data and information on income-contingent student loans from the National Tax Service and the Korea Student Aid Foundation. Accordingly, borrowers who wish to apply for adjustment of income-contingent student loans to the Credit Recovery Committee no longer need to obtain and submit overdue-related data and information from the National Tax Service or the Korea Student Aid Foundation themselves, thus eliminating inconvenience.

The amendment approved at the Cabinet meeting will take effect from the date of promulgation.

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