Students in military get loan break

Starting from this year, students from low-income families will be exempted from paying their student loan interest while they are serving in the military, the Ministry of National Defense said yesterday.

At the New Year’s policy-setting meeting, the ministry submitted a report to President Lee Myung-bak regarding the plan and told Lee that they allotted 14.2 billion won ($12.3 million) of the budget to pay for the loan deferment scheme starting this year, using some of the Ministry of Education, Science, and Technology’s budget as well.

“Serving in the military is a national duty and we thought students in the military should be rewarded for their service,” a Defense Ministry official told the Korea JoongAng Daily.

In the report to the president, the ministry also said that they devised the plan to prevent students from suffering penalties for overdue payments during their military service.

The ministry’s new plan will cover the 25,768 students who received the so-called Income Contingent Loan (ICL), a government-run loan program recently launched for those from households in the bottom 70 percent of the income bracket, offered with 3.9 percent compound interest. So far, most of the students who received the ICL loans opted to postpone their interest payment during the roughly two-year military duty.

The new plan will annually pay about 550,000 won ($478) in interest for each student with an ICL program in the military.

By Kim Hee-jin [heejin@joongang.co.kr]