(CTN News) – Thailand’s Student Loan Fund (SLF) has bad debts totalling 100 billion baht (US$2,816,902,000). This represents a huge increase over 2017, when the total non-performing loans stood at 60 billion baht.
The SLF’s manager, Chainarong Katchapanan, believes the increase is due to borrowers preferring other repayments, such as credit card debt and mortgages, above college loans.
The SLF is adopting new procedures under the updated Student Loan Fund Act of 2023 to encourage borrowers to repay their outstanding obligations. The goal is to reduce the number of non-performing loans while ensuring the fund’s long-term financial health.
The new law takes a novel approach to debt payback computations. When a borrower makes a default loan payment, the funds are initially applied to the principal sum.
Once that is paid off, the money is applied to accrued interest and, eventually, any leftover penalty. According to the Bangkok Post, repayments now prioritise covering outstanding fines and interest before paying the principle. This is a significant change from the previous.
Furthermore, the new law caps loan interest at 1% per year and imposes a 0.5% yearly fee on defaulters. This is a significant reduction from the old arrangement, which cost borrowers 1% per year in interest and a hefty 7.5% penalty for default.
Thailand’s Student Loan Fund Expanding Services for Upskilling and Reskilling
Chainarong believes these modifications will encourage borrowers to make payments more quickly by ensuring that the primary portion is paid off first, reducing their loan balance as soon as feasible.
According to Chainarong, the SLF currently has 3.5 million borrowers and loans totalling 480 billion baht ($13,521,129,600).
Thailand’s SLF wants to provide lending services to all working-age persons (18-65). The move, aimed at upskilling and reskilling, is in response to Thailand’s movement towards an ageing society.