Gyeonggi Province Supports Credit Recovery for Young Adults with Student Loan Delinquencies in Partnership with Korea Student Aid Foundation

[Suwon Ilbo=Park No-hun] Gyeonggi Province is launching a credit recovery support project targeting young adults who have been registered as credit delinquents due to student loan defaults.

The core of the initiative is to provide credit recovery opportunities and time to repay for youths experiencing difficulties in obtaining loans or securing employment due to credit deterioration caused by long-term student loan delinquency.

On the 18th, Gyeonggi Province and the Korea Student Aid Foundation concluded a memorandum of understanding for the 'Student Loan Long-Term Delinquent Credit Recovery Support Project' through non-contact written communication.

Under this agreement, the Korea Student Aid Foundation will implement an 'installment repayment agreement' for youths who took out student loans and became registered as credit delinquents due to being overdue for more than six months.

The installment repayment agreement is a system that extends the repayment period to a maximum of 20 years when approximately 5% of the total debt amount (principal plus interest) is prepaid upfront, with agreements typically made within 10 years.

Once an installment repayment agreement is made, the young adult undergoes credit recovery procedures including deregistration from Korea Credit Information Services' credit delinquent registry, exemption from overdue interest, and suspension of legal action.

Additionally, there is the advantage of dividing principal and interest payments over an extended period, reducing the immediate repayment burden.

Gyeonggi Province plans to pay the initial prepayment required for the installment repayment agreement (5% of the debt principal and interest). As this is the province's first such project this year, it plans to support approximately 700 people with 250 million won.

Accordingly, the province will pursue consultations with the Ministry of Health and Welfare on establishing new social security systems and supplementary budget allocations, with plans to recruit participants as early as October this year.

Additionally, the province is reviewing ways to link this agreement project with its existing 'Gyeonggi Ultra-Low Credit Loan Project' and 'Gyeonggi Province Youth Worker Savings Project.'

This is to establish a comprehensive credit recovery support system for youths encompassing financial support, asset formation, and credit recovery.

The province is currently implementing an ultra-low credit loan project providing small loans of up to 3 million won per person at 1% annual interest to residents with credit grades of 7 or lower (6 or lower for low-income earners). The plan is to use this system to help with early repayment of student loans.

Additionally, the province plans to encourage employment through the Youth Worker Savings Project, which provides young workers with a total of 5.8 million won upon maintaining work for two years, and will further support the establishment of an economic foundation.

Park Seung-sam, Director of the Lifelong Education Bureau at Gyeonggi Province, said, "Amid COVID-19 employment difficulties, a credit crisis could lead to a vicious cycle of youth poverty. Through this agreement, we hope that young people will be able to escape economic crisis in the future and carry out debt repayment and normal economic activities," he added.