The Nationthailand

Add to Home Screen.

SUNDAY, September 24, 2023

Student loan repayments plummet as relaxed terms expected soon

Student loan repayments plummet as relaxed terms expected soon
FRIDAY, September 23, 2022

The Student Loan Fund (SLF) has seen a steep drop in repayments since last week, when the House of Representatives passed legislation freeing debtors from interest burdens, default fines and guarantor requirements.

SLF manager Chainarong Katchapanan remarked on the repayments slowdown on Friday.

He said it was likely SLF debtors were waiting for clarity on the legislation, which will be vetted by the Senate after the new parliamentary session starts on November 1.

Debt repayments have dropped from 50 million baht per day to 10 million per day recently, said the fund’s manager.

Repayments are made through automatic deductions from the debtors’ monthly salaries or by the debtors themselves.

Legislation to amend the Student Loan Fund Act was passed by 314 votes to three.

The current law imposes interest penalties and fines for defaults while also requiring third parties to guarantee loans.

Chainarong said the current default fine of 1 per cent and annual interest of 2 per cent are reasonable.

The bill would apply retroactively to borrowers and guarantors who sealed student loan agreements before it passed.

The SLF currently has assets of 370 billion baht and lends about 40 billion baht per year, with annual debt repayments of 30 billion baht.

Additional revenue of 6 billion baht per year comes from default fines and interest.

In the current academic year, a total of 638,132 students have secured SLF loans worth 38.8 billion baht.

Over the next five years, the SLF is expected to lend a total of 200 billion baht, against estimated repayments of 150 billion. With no interest and default fees, it would be deprived of some 6 billion baht in revenue per year.

Chainarong said that to stay afloat, the fund would have to rely on the discipline of debtors and perhaps a top-up budget from the government.