Thailand’s Student Loan Fund tackles 100 billion baht in bad debts

Picture courtesy of studentloan

The Student Loan Fund (SLF) in Thailand has accumulated bad debts amounting to 100 billion baht (US$2,816,902,000). This is a significant increase from 2017 when the total non-performing loans stood at 60 billion baht. The SLF’s manager, Chainarong Katchapanan, attributes this surge to borrowers prioritising other repayments, such as credit card debt and mortgages, over their student loans.

The SLF is implementing new measures under the revised Student Loan Fund Act of 2023 with the hope of incentivising borrowers to pay off their outstanding debts. The goal is to decrease the volume of non-performing loans and maintain the fund’s long-term financial stability.

The new law has introduced a fresh approach to loan repayment calculations. When a borrower makes a payment on a defaulted loan, the payment is first applied to the principal balance. Once that’s paid off, the money goes towards the accrued interest and, finally, any remaining fines. This is a stark shift from the past, when repayments were first used to cover outstanding fines and interest, with the principal only being paid once these were cleared, reported Bangkok Post.

Furthermore, the amended law has set a cap on loan interest at a maximum of 1% per year and a 0.5% annual fine for defaulters. This is a considerable reduction from the previous arrangement, where borrowers were charged 1% per year in interest and a hefty 7.5% fine for defaulting.

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Chainarong believes these changes will motivate borrowers to make payments more promptly as it ensures the principal balance is paid off first, thereby reducing their overall loan balance as quickly as possible.

The SLF, as per Chainarong, currently has 3.5 million borrowers with loans totalling 480 billion baht (US$ 13,521,129,600).

In related news, the SLF in Thailand announced plans to extend its loan services to all working-age adults, aged between 18 and 65. The move, aimed at upskilling and reskilling, is in response to Thailand’s shift towards an ageing society.

Thailand News

Mitch Connor

Mitch is a Bangkok resident, having relocated from Southern California, via Florida in 2022. He studied journalism before dropping out of college to teach English in South America. After returning to the US, he spent 4 years working for various online publishers before moving to Thailand.

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