"Only Fools Who Diligently Repay Debt?"... Controversy Over 'Debt Investment Tribe' Privileges in Youth Debt Forgiveness

Government Establishes 'Special Program' to Help Indebted Youth Recover
Why Government Intervenes in Personal Investment Failures...Fairness and Moral Hazard Controversies Arise

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[Asia Economy Reporter Yoon Seul-gi] As the government has decided to support debt restructuring for the youth, concerns are being raised that this might be giving special favors to the so-called 'Bittujok' (people who invest using borrowed money) who made reckless investments by borrowing.

According to the Financial Services Commission on the 14th, the second Emergency Economic and Livelihood Meeting chaired by President Yoon Suk-yeol discussed financial sector livelihood stabilization measures. In particular, debt restructuring support measures for youth recovery and supplementary financial support measures for low-income and low-credit individuals were the main focus.

The government judged that the difficulties faced by young people in their 20s and 30s, who have a high loan ratio compared to their income due to soaring prices and rising interest rates, are relatively severe. To help their rehabilitation and recovery, it decided to establish a special rapid debt restructuring program under the Credit Recovery Committee (Shinbokwi). Initially, interest reduction and repayment deferral will be temporarily supported for one year until late September.

If selected for the debt restructuring program, individuals can receive a 30-50% reduction in interest based on their income, assets, and debt burden. This means that an interest rate of about 10% per annum will be lowered to around 5-7%. Additionally, principal repayment deferral will be granted for up to three years, during which a low interest rate of 3.25% per annum will be applied. Eligible candidates are low-credit youth aged 34 or younger with credit scores in the bottom 20% (NICE 744 points, KCB 700 points).

However, there are fairness concerns as this measure effectively forgives the debts of 'Yeongkkeul' (people who invest by borrowing to the extent of their soul) and 'Bittujok' who have focused on asset investment by taking advantage of low interest rates over the past two years. Critics argue that it is inappropriate for society to bear the responsibility for failures caused by reckless borrowing. There are also criticisms that if the government repays debts, moral hazard could spread.

The government maintains that support for the youth is necessary. On this day, President Yoon said, "Self-employed and small business owners who inevitably had to increase loans due to COVID-19, ordinary citizens who took 'Yeongkkeul' loans to buy homes amid soaring real estate prices, and young people who borrowed to invest in stocks out of anxiety for the future are all struggling to repay principal and interest."

Financial Services Commission Chairman Kim Joo-hyun also addressed concerns about moral hazard surrounding the youth special program, stating, "(The authorities) are fully aware of the moral hazard issue. Nevertheless, we are pushing forward because we believe that without supporting the core future generation of people in their 20s and 30s, a sustainable society cannot be achieved. We will minimize (the moral hazard issue) as much as possible through screening during the application process."

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