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Student Loan Rate Likely to Exceed 8 Pct.

Posted July. 21, 2008 03:38,   


Despite the government’s effort to alleviate the financial burden coming from college tuition fees, the student loan interest rate for the second semester of this year is expected to exceed 8 percent.

The Ministry of Education, Science and Technology said yesterday that the student loan rate, which stood at 7.65 percent in the first semester, is likely to hit the 8-percent mark in the next semester, as the five-year treasury bond, which has a decisive impact on student loan rates, recently soared.

The five-year treasury bond rates jumped from around 4 percent in the first half of this year to about 6 percent recently, with little sign of going down again. Korea Housing Finance Corporation, responsible for student loans, is also adding pressure to raise loan rates, citing the need to compensate for the accumulated losses.

Against this backdrop, the ministry believes that the student loan rate is most likely to go up as much as 8 percent.

A ministry source said, “We cannot cut the student loan rate because it is decided by the market rates, rather than by the government, but we’re working to reduce the increase margin.”

Normally, the ministry announces the student loan rate for the second semester in early July every year. It is, however, planning to determine the rate late July this year, after watching the financial market situation.

In June, the ministry disclosed its plan to expand government assistance to reduce the financial burden that students and their families suffer from paying high interest.

It promised to expand interest-rate assistance from 2 percent to 3 percent for the bottom 30 to 50 percent of the income deciles, and extend 1-percent assistance to the bottom 60 to 70 percent, which has been excluded from state assistance.