Student Loan Interest Rate Frozen at 1.7% for First Semester Next Year... Income Criteria Relaxed

[Asia Economy Reporter Yoo Byung-don] The government has decided to freeze the student loan interest rate for the first semester of next year at the current annual rate of 1.7%.

On the 28th, the Ministry of Education announced that this decision was made through the '2022 3rd Student Loan Support System Deliberation Committee' held the previous day at the Government Sejong Complex.

Although the government's burden is expected to increase due to the rise in procurement costs following the base interest rate hike, the Ministry of Education explained that the student loan interest rate was frozen to reduce the household burden.

To this end, the Ministry of Education increased the student loan project budget from 140 billion KRW this year to 228.4 billion KRW next year, an increase of 88.4 billion KRW.

The eligibility criteria for student loans (threshold for support section 8) will be slightly relaxed from a recognized monthly income of 10,242,160 KRW to 10,801,928 KRW. As the 'standard median income,' which is the criterion for national welfare projects, rises to 5,409,640 KRW for a four-person household next year, the student loan eligibility, set at 200% of the median income, also increased accordingly.

For income-contingent repayment student loans, repayment obligations arise only after securing a job and earning a certain level of income; this threshold is also linked to the median income and will rise from 23.94 million KRW to 25.25 million KRW.

Additionally, from the first semester of next year, the Ministry of Education will allow learners in the Academic Credit Bank System to receive general repayment student loans (tuition loans), and will expand the income-contingent repayment student loan eligibility to include students of special and professional graduate schools.

For youth preparing for independence, income-contingent repayment student loans will be provided regardless of income, and living expense loans will be supported interest-free.

Jang Sang-yoon, Vice Minister of Education, explained, "Recently, with high interest rates, high inflation, and a global economic recession overlapping, the financial burden on young people for tuition is significant. In such circumstances, student loan support that guarantees university education opportunities as a 'fair start' for social entry is more important than ever."