Deferred tuition adopted for university students
Published: 14 Jan. 2010, 20:42
Ruling and opposition parties reached an agreement yesterday on a bill on a university tuition loan system that will enable students to borrow money for tuition and pay it back after graduating and finding a job.
The new system, dubbed “income-contingent loans,” or ICLs, is expected to ease the tuition burden for both students and parents. However, some fear the annual interest rate of 5.8 percent may boomerang on them later.
Lawmakers yesterday morning agreed to vote in favor of the bill and will gather next Monday to pass it, the Education, Science and Technology Committee of the National Assembly said. “We welcome the move from both sides to proceed with the controversial tuition fee repayment system,” said Ahn Sang-soo, floor leader of the ruling Grand National Party.
The bill has languished at the National Assembly since the government submitted it in November, four months after it was initially proposed.
If passed, the bill will take effect in March when Korean universities start the spring semester. Application for the loans will begin today at the state-run Korea Student Aid Foundation home page, but only those who received a B average last semester will be eligible. As of the first semester last year, over 75.2 percent of Korea’s university students received a grade average of B or better.
For freshmen to qualify, the ministry proposed they have grades between one and six on the annual College Scholastic Aptitude Test. The test has nine grades.
“Only those students who are passionate about their studies can be supported because their achievement will lead to better jobs. The system can persist only when the recipients maintain a specific rate of tuition repayments afterwards,” said Lee Ju-ho, vice minister of education. Those with lower grades can apply for existing loans available to all students. The ministry said one-third of all university students, totaling some 740,000, will take advantage of the ICLs. In addition to tuition fees, students will also be allowed to borrow living costs up to 2 million won ($1,784) annually.
ICLs are distinguished from existing loans in that students don’t need to pay interest while attending school. Users of existing loans are required to start paying interest immediately. And they must pay off the loans during a set maturity period whether they are employed or not. The idea of ICLs came as an increasing number of university students resorted to credit card loans, only to face spiraling credit delinquencies and eventual defaults.
Immediately after gaining sustainable income from employment after graduation, ICL recipients will have their monthly payments automatically deducted from their paychecks. If they fail to pay any portion of the loans within three years after graduation, education authorities will investigate and forcefully collect payments. The National Tax Service may slap a fine of up to 5 million won on defaulters, according to the ministry.
Some civic groups say the interest rate is too high. “If the compound interest throughout the loan extension period is combined, the money to be repaid could double or triple, eventually making someone default,” said the People’s Solidarity for Participatory Democracy. It said the interest rate should be lowered to 3 or 4 percent on a non-compounding basis.
By Seo Ji-eun [[email protected]]
The new system, dubbed “income-contingent loans,” or ICLs, is expected to ease the tuition burden for both students and parents. However, some fear the annual interest rate of 5.8 percent may boomerang on them later.
Lawmakers yesterday morning agreed to vote in favor of the bill and will gather next Monday to pass it, the Education, Science and Technology Committee of the National Assembly said. “We welcome the move from both sides to proceed with the controversial tuition fee repayment system,” said Ahn Sang-soo, floor leader of the ruling Grand National Party.
The bill has languished at the National Assembly since the government submitted it in November, four months after it was initially proposed.
If passed, the bill will take effect in March when Korean universities start the spring semester. Application for the loans will begin today at the state-run Korea Student Aid Foundation home page, but only those who received a B average last semester will be eligible. As of the first semester last year, over 75.2 percent of Korea’s university students received a grade average of B or better.
For freshmen to qualify, the ministry proposed they have grades between one and six on the annual College Scholastic Aptitude Test. The test has nine grades.
“Only those students who are passionate about their studies can be supported because their achievement will lead to better jobs. The system can persist only when the recipients maintain a specific rate of tuition repayments afterwards,” said Lee Ju-ho, vice minister of education. Those with lower grades can apply for existing loans available to all students. The ministry said one-third of all university students, totaling some 740,000, will take advantage of the ICLs. In addition to tuition fees, students will also be allowed to borrow living costs up to 2 million won ($1,784) annually.
ICLs are distinguished from existing loans in that students don’t need to pay interest while attending school. Users of existing loans are required to start paying interest immediately. And they must pay off the loans during a set maturity period whether they are employed or not. The idea of ICLs came as an increasing number of university students resorted to credit card loans, only to face spiraling credit delinquencies and eventual defaults.
Immediately after gaining sustainable income from employment after graduation, ICL recipients will have their monthly payments automatically deducted from their paychecks. If they fail to pay any portion of the loans within three years after graduation, education authorities will investigate and forcefully collect payments. The National Tax Service may slap a fine of up to 5 million won on defaulters, according to the ministry.
Some civic groups say the interest rate is too high. “If the compound interest throughout the loan extension period is combined, the money to be repaid could double or triple, eventually making someone default,” said the People’s Solidarity for Participatory Democracy. It said the interest rate should be lowered to 3 or 4 percent on a non-compounding basis.
By Seo Ji-eun [[email protected]]
with the Korea JoongAng Daily
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