6 June 2024

The Senate voted 179:4 today (Tuesday) in support of the Student Loan Fund for Education Bill, earlier approved by the House, which seeks to exempt interest on loans and fines in case of repayment defaults.

A 27-member panel was set up to scrutinise the bill before it moves on to its second reading.

During the debate today, most senators agreed with the principle of student loans to enable disadvantaged students to further their studies, but opposed the idea of not charging interest on the loans granted or exempting fines for students who default on loan repayments, for fear that this may lead to a breakdown of financial discipline among the borrowers and depletion of loan fund for students in the future.

Senator Wallop Tangkhananurak said during the debate that one of the roles of the Senate is to correct an incorrect or unsuitable Bill.

Another senator, Kamnoon Sidhisamarn, said that he also disagreed with the concept that student loan should be granted without a guarantor. He pointed out that loan repayments should be used to repay the principal amount as first priority, as stipulated in the original version of the Bill proposed by the government.

Senator Wanchai Sornsiri said that, with an absence of a guarantor for a loan, no one will be held accountable in case the borrower defaults.

Senator Air Vice Marshal Chaleomchai Krua-ngam said that 26% of the borrowers had defaulted in repayments and, if this situation goes on, the revolving amount in the Student Loan Fund, averaging 40 billion baht a year, will be depleted by half within a year and, within just a few years, the Fund will dry up.

Senator Seree Suwanpanont said, however, that he agrees with the House, that the state must take care of the education for its people. The concept of a Student Loan Fund is wrong from the beginning, he said, adding that the state should arrange for free education for students, not grant loans to them.

Chainarong Katchapanan, the Fund manager, disclosed that a total of 6,415,515 students have been granted loans, totalling 106,357 million baht since the Fund was created. 1,682,229 borrowers have fully repaid their loans, amounting to 130,470 million baht.

Currently, there are 3,500,000 borrowers who are still indebted to the Fund and, of these, 2,290,000 have defaulted in repayments once or more, amounting to 90,856 million baht in overdue debts.

Since 1996, he said that the Fund had received about 468 billion baht budget from the state, with the last amount in 2017. Since 2008, the Fund has been able to stand on its own, without additional budget, by relying on revolving funds from instalment repayments.

Without fines for repayment defaults, he said that the Fund will run short of about six billion baht per annum in revenue. He also noted that, since it was reported that the House would exempt interest on student loans and fees on defaults, the default rate has increased by 26%.

Chainarong said that the Fund has no policy to take students to the court unless it is necessary. He explained that the Fund may lose its right to reclaim the money, estimated at about 8 billion baht, because the cases will expire.

The interest rate for student loans is currently 1% and the fine is 7.5% of the unpaid loans.

The Bill, when it becomes law, will be applied to both new and old loans.