Proposal to lower the student loan rate

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Students follow health and safety measures before entering class at Matthayombanbangkapi School in Bang Kapi district. (Photo: Varuth Hirunyatheb)

The interest rate on the Student Loan Fund will be lowered to reduce the burden on borrowers, Permanent Secretary for Finance Krisada Chinavicharana said.

A bill to amend the fund sets the new interest rate at a maximum of 2%, down from the current maximum of 7.5%, he said.

The House of Representatives passed the first reading of the bill. The House is expected to have a second and third reading this year.

Mr Krisada said the fund had never charged the maximum rate in its 20 years of existence, keeping the rate at 1%.

During the pandemic, the fund cut the rate to 0.01% to ease the burden on borrowers. This lower rate is valid until the end of this year, he said.

The House committee reviewing the bill after first reading wants the fund to charge an effective interest rate of just 0.25 to 0.5 percent, Krisada said.

Chainarong Katchapanan, director of the Student Loan Fund, said the maximum interest rate of 2% is flexible.

The fund plans to provide loans to those who wish to pursue masters and doctoral studies in the future.

Currently, the fund only lends to high school students and undergraduates pursuing a bachelor’s degree.

The fund has provided loans worth 692 billion baht to 6.21 million borrowers since its inception. Of this total, 1.56 million borrowers made repayments worth 114 billion baht.

Among the rest, more than 1 million borrowers have combined loans of 121 billion baht and are currently in the grace period for repayment, while 3.52 million borrowers with combined loans worth 450 billion are being reimbursed.

Borrowers who die or who are classified as having a disability do not have to repay their loans. This category includes 67,300 borrowers with combined loans worth 5.5 billion baht.

Mr Chainarong said earlier that the fund had received a lower level of debt repayment from borrowers, in part due to the pandemic affecting their income.

The latest level of debt repayment fell by 10% year-on-year due to the impact of the pandemic as well as the fund’s decision to reduce borrowers’ monthly debt repayment requirement .

The fund expects debt repayment of 32 billion baht this year.

The fund has about 200,000 borrowers who have defaulted on their debts and could be sued by the fund.

However, the fund plans to negotiate with them to settle reimbursement disputes, he said. This should save borrowers time and related costs, Mr. Chainarong said.

If the fund is to sue all those borrowers, the process would cost it about 1 billion baht, he said.

Those who enter the settlement process must not fail to repay their debt or the fund will seek a court order to force them to pay the overdue amount, Mr. Chainarong said.

The fund had bad debts amounting to 82.8 billion baht last year.

For the half of 2022, the fund has set aside 38 billion baht in loans, almost the same as last year.

Each student can borrow up to 200,000 baht per year.

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