Debtors await clarity on student loans

The number of borrowers repaying debt to the Student Loan Fund declined from September to November as some people chose to wait for the amended version of the law regarding lower interest rates and default fines, says fund manager Chainarong Katchapanan.

He said from Sept 15 to Nov 30, when there was a movement to amend the Student Loan Fund Act, borrowers repaying debt directly to the fund paid 2.07 billion baht, down 28% year-on-year.

Borrowers who have their employers repay such debt to the fund from their salary paid 4.58 billion baht to the fund, a similar level from the same period last year.

Mr Chainarong said total debt repayment by borrowers fell 12% year-on-year during the period.

In September, the House of Representatives passed an amendment bill freeing fund debtors from interest, default fines and guarantor requirements.

However, when the bill was passed to the Senate, lawmakers changed it so the fund charges a maximum interest rate of 1% per year and a maximum 0.5% monthly fine for overdue payment.

The current law sets the maximum interest rate for student loans at 7.5% per year, but in practice the fund management charges 1%.

The maximum monthly default fine is capped at 7.5%. The repayment period is 15 years.

The Senate is scheduled to present its own version of the amended bill for the House to consider in the third reading session.

If an agreement is not reached, a joint panel is created to vet the bill.

Mr Chainarong said the fund does not have a liquidity problem. It extends loans worth around 40 billion baht every year.

At present, the fund has granted 697 billion baht to more than 6.2 million students. Its outstanding debt totals 338 billion baht.