[EDITORIALS]Keep student aid aliveOnly two months before the new school year, nine commercial banks threatened to stop educational loans for university students. The banks were reacting to a decision by the Ministry of Education and Human Resources Development to lower the interest rate on government-subsidized student loans from the current 9.5 percent per annum to 8.5 percent.
Last year, loans for school expenses amounted to 783 billion won ($658 million) and more than 300,000 students used the loans to finance their education. Because such a large number of students use those loans, many of them will not be able to continue their education if the loans are cut off. Especially in these difficult economic times, school expenses are a heavy burden for lower-income households. No student should be forced to end his schooling because he or she cannot afford it, no matter how smart he is or how much a zeal for learning he has. Providing educational opportunities for talented youth is a government responsibility.
The banks say that they cannot accept the ministry’s plan to lower interest rate because 4 percent of the loans are not being paid back on time, the loan period is 18 years and the average loan is not paid back for 5.5 years. We fully understand the banks’ difficulties. It is not right to ask private financial companies to bear the burden of this social necessity. The government must consider a compensation policy. The government and the banks work hand-in-glove on other issues, so the negotiations between the two should be smooth.
Both parties must find a way to reduce the rate of overdue payments to maintain a balance between loans and repayments.
The government and the banks must prevent a situation in which many students are forced to give up registering for the new semester because of financial problems. The government should offer to lower the rates for loan insurance, which students partly pay, and then induce the banks to lower their interest rates.
The banks must not hesitate out of worries about insolvencies to give loans to students, who will be the pillars of the nation.