The Student Loan Fund needs to review its management to ensure sustainability, says Finance Minister Arkhom Termpittayapaisith.
His remark came after the House of Representatives passed an amendment on Wednesday, freeing the lender's debtors from interest, fines for defaults and the requirement of a guarantor.
The move helps more than 3 million students in default avoid legal action.
Mr Arkhom said the fund will have to seek ways to promote repayment discipline among borrowers, which will become essential to the fund's liquidity once the amendment takes effect.
According to the new law, the fund will no longer receive revenue from interest or fines from debt defaults, but solely from the borrowers' principal payment.
The fund, which was established 20 years ago, no longer seeks a budget from the government as it uses its own revolving fund to extend loans to students, he said.
Loan manager Chainarong Katchapanan said the fund was founded with a 3-billion-baht budget from the government. The government has injected an additional 400 billion baht into the fund since the initial allotment.
The fund, which started extending loans in 1996, has lent 690 billion baht in total to 6.2 million students. Some 1.6 million students have already completed their debt repayments. The fund has around 1 million borrowers who are taking classes and do not have to start repaying their debt yet.
Of the other 4.6 million students, around 3.5 million have graduated and are now repaying their loans. However, 2.5 million of these have failed to repay their loan by the due date, accounting for 90 billion baht in principal payments.
The fund extends roughly 40 billion baht in loans per year, of which 30 billion per year was repaid. The fund usually generates revenue of around 6 billion baht per year from a combination of interest at 1% per year and fines for defaults.