The interest rate for the Student Loan Fund will be lowered to reduce the burden on borrowers, says permanent finance secretary Krisada Chinavicharana.
A draft law to amend the fund set 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 draft law. The House is expected to have a second and third reading this year.
Mr Krisada said the fund has never charged the maximum rate in its 20 years of existence, maintaining the rate at 1%.
During the pandemic, the fund reduced the rate to 0.01% to alleviate the burden on borrowers. This lower rate is valid until the end of this year, he said.
The House committee that is set to vet the draft law after the first reading wants the fund to charge an effective interest rate of only 0.25-0.5%, said Mr Krisada.
Chainarong Katchapanan, manager of the Student Loan Fund, said the 2% maximum interest rate is flexible.
The fund is planning to extend loans to those wishing to pursue master's and doctorate degrees in the future.
Currently the fund only lends to secondary school students and undergraduates pursuing a bachelor's degree.
The fund has granted loans worth 692 billion baht to 6.21 million borrowers since its inception. Of the total, 1.56 million borrowers have completed repayments worth 114 billion baht.
Among the remainder, more than 1 million borrowers have combined loans of 121 billion baht and are in a grace period for repayment at present, while 3.52 million borrowers with combined loans worth 450 billion are in the repayment process.
Borrowers who die or become 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 the fund received a lower level of debt repayment from borrowers, partly as a result of the pandemic affecting their income.
The latest level of debt repayment fell by 10% year-on-year because of the impact of the pandemic as well as the fund's move to reduce the monthly debt payment requirement for borrowers.
The fund expects debt repayment of 32 billion baht this year.
The fund has around 200,000 borrowers who have failed to repay their debts and could be sued by the fund.
However, the fund plans to negotiate with them to settle the repayment disputes, he said. This should save time and related costs for borrowers, said Mr Chainarong.
If the fund has to take all these borrowers to court, the process is expected to cost the fund around 1 billion baht, he said.
Those who enter the settlement process must not fail to pay their debt again or the fund will ask for a court order to force them to pay the overdue amount, said Mr Chainarong.
The fund had bad debts tallying 82.8 billion baht last year.
For the 2022 semester year, the fund set aside 38 billion baht in loans, almost the same as last year.
Each student can borrow up to 200,000 baht per year.