The Korea Student Aid Foundation, created to support young people's futures, is the only public institution that has not joined the Credit Counseling and Recovery Service's rapid and pre-emptive debt restructuring agreement.
The foundation's absence from the program was raised at a recent meeting of the Financial Services Commission's inclusive finance strategy task force, financial industry sources said on the 3rd.
The CCRS runs a rapid and pre-emptive debt restructuring program that lowers contracted interest rates and extends repayment periods for borrowers less than 90 days past due. The aim is to restructure debt quickly before it becomes long-term delinquency, keeping borrowers from falling into default status. Because the foundation has not joined, borrowers less than 90 days behind on student loans cannot have that debt restructured in a single process.
The foundation says it supports short-term delinquency through its own program. But critics say the issue should be viewed from the perspective of young borrowers. The value of CCRS restructuring lies in consolidating debts across multiple financial firms and adjusting them based on a borrower's capacity to repay, helping restore credit standing. Even when combined restructuring is completed, student loans less than three months past due are left out.
The rapid and pre-emptive program cuts contracted interest rates by up to 70%, while the foundation only waives late payment charges of up to 6% and offers no reduction in contracted interest. A foundation official said the student loan rate is 1.7%, lower than the 3.25% minimum rate under the rapid and pre-emptive restructuring program.
Financial industry officials describe the foundation as the last remaining gap in the CCRS system. Other taxpayer-funded public institutions, including the Korea Workers' Compensation and Welfare Service and the Korea Small Business Institute, take part in the program. "Private financial firms have their own programs too, but they still participate in the CCRS system," one industry official said. "Putting young people's entry into society ahead of debt collection is the foundation's core duty."
