To write off or not to write off: Two sides of student loan repayment battle
The Student Loan Fund (SLF) is dismissing calls for it to write off 337 billion baht of loans taken by students to fund their education.
Over the past few weeks, thousands of people have been pushing for their student debt to be forgiven. The campaign, run under the hashtag #SLFdebtforgiveness, claims that canceling their debt would combat social inequality and support people’s efforts to improve their lives.
However, not everyone is convinced by this argument.
“Forgiving loans will not improve people’s access to education,” SLF manager Chainarong Katchapanan said. “On the contrary, it will deprive the younger generation of opportunities that SLF can provide.”
What is SLF
Initially established via a Cabinet resolution in the mid-1990s, SLF began by offering loans to cash-strapped students at high school, vocational school or university level. The interest rate on the loans was as low as 1 percent and the repayment period as long as 15 years.
With such generous loan conditions, SLF offered hope to young people who want to improve their future prospects through education.
Although the government separately introduced the now-defunct Income Contingent Loan – with applicants only required to start repayments once their monthly income hit 16,000 baht based on 2012 conditions – SLF continued to flourish and offer loans.
Today, SLF operates under the Student Fund Loan Act as an independent legal entity under the supervision of the finance minister.
Its main mission now is to provide loans to students who are cash-strapped, A-graders or those interested in fields crucial to the country’s development or lacking skilled workers.
Positioned as a self-sustaining fund, SLF has been able to operate without additional money from the state since the academic year 2018. New loans are funded through repayments on old ones.
SLF has so far granted loans to 6.2 million students, 1.6 million of whom have completed their repayments. The fund is now in the process of collecting repayment from 3.45 million graduates who have completed their degrees. The remaining 1 million or so debtors are still studying so do not need to begin repaying.
Quarrels with its debtors
Records show that up to 2 million SLF loan recipients have defaulted on their repayment. Every now and then, SLF invites its debtors to renegotiate their debts in order to avoid having to go to court. Yet SLF often takes debtors to court after they ignore their obligations.
For instance, one recent graduate’s debts to SLF grew to more than 300,000 baht after he repeatedly defaulted on payments. It was only when legal proceedings got to a point where he would have to forfeit his condo worth over 3 million baht, that the graduate agreed to pay the money back.
In some cases, the SLF has had to contact employers to get monthly payments deducted from the debtors’ salaries.
Bigger demands from debtors
However, many SLF loan recipients now say they should not be required to repay at all. Their claim is that the government should cover their debts because it should have provided free education from the start. They argue it should also make concessions for people who are suffering economic hardship due to the pandemic.
Thousands of debtors have reportedly fallen behind with their repayments after losing their jobs or suffering salary cuts.
Reaction from the powers that be
The government and SLF have insisted that people pay up, arguing that otherwise the state coffers would be drained and the young generation’s honesty, responsibility and financial discipline be compromised.
The authorities, so far, reckon that the SLF should be as flexible as possible.
In the wake of the COVID-19 crisis, SLF is offering various special deals to its debtors. For instance, it has cut the interest rate from 1 percent to just 0.01 percent a year for those who have never defaulted. It is also offering a 5 percent discount on the principal if borrowers agree to repay in one go.
Even defaulters are being offered an easy way out. They can double their repayment period to 30 years or until they turn 65, whichever comes first.
By Thai PBS World’s General Desk