SLF: a shark in student waters
The Student Loan Fund (SLF) should stop its fierce pursuit of those who cannot repay their debts in time.
Taken into account alongside the Covid-19 pandemic and the worst economic recession in decades, surely it would be better if the fund urgently sought ways to help jobless, debt-ridden graduates get back on their feet.
The House of Representatives is updating the Student Loan Fund Act to improve its services and efficiency. One hopes any amendment will make students' best interest the fund's priority, not the continuation of punitive measures, inflexible rules and organisational rigidity -- all of which stem from its persistent prejudice against the defaulters as being unethical and financially irresponsible.
According to a study by Kajorn Thanapase, director of the Financial Consumer Protection and Market Conduct Department, Bank of Thailand, the SLF has the highest rate of non-performing loans in the country with more than 2.3 million defaulters out of 6.4 million borrowers.
The crux of the problem, says the study, is not the borrowers' lack of financial discipline but the fund's rigid and unsympathetic structure of repayment and the high interest rates that turn millions of borrowers into defaulters.
For example, graduates are allowed an interest-free grace period of only two years. After that, they are required to pay an annual instalment at a high interest rate that increases every year. For those who miss a payment, the next instalment is at an even higher interest rate; if the terms cannot be met, the result is default. If debtors cannot pay up within 15 years as required, they then face lawsuits and life difficulties including the fund hounding their employers.
The SLF complains about a lack of funds to support new borrowers. Yet its pursuit of defaulters costs the fund more than one billion baht a year in legal fees. The lawsuits are costly, lengthy and fruitless. If not pointless: the majority of defaulters cannot pay because they are in financial difficulty and unemployed, not because they want to cheat.
A case in point is Sunisa (last name withheld). The court ruled that she must pay the SLF 5,000 baht a month in 97 monthly instalments. Sunisa earned only 9,000 baht a month. How could she possibly take care of her daughter and ailing parents with only 4,000 baht a month? The SLF also forces employers to deduct repayments from debtors' salaries without considering their hardship. Is the fund's goal to help or to hurt?
It would be more worthwhile to use the one billion baht to set up programmes to help defaulters overcome their difficulties, as well as to help them reskill and get better jobs so that they can meet their loan obligations.
Real change requires the SLF to fix its rigid rules and regulations. For example, the fund must stop charging high interest.
It was set up to help poor students get higher education, not to make a profit. Also, repayment schedules must be more flexible and repayment periods must be extended from the current 15 years.
Change is possible if the SLF stops viewing their clients as criminals and instead as a disadvantaged group trapped in a punishing system who need support to survive in a society ridden by inequalities.
The fact that many defaulters are unemployed or stuck in low-paid jobs reflect the gap between the education system and job markets.
Instead of just giving loans and taking defaulters to court, the SLF should work with other sectors in society to connect students with the job market.
According to the 2017 constitution, the government has an obligation to support the SLF budget to bridge education disparity. The SLF should then stop saying it needs to sue defaulters so that it can support new students in need.
The fund requires a database to locate graduates who are still trapped in difficulties. Moreover, a debt restructuring programme with an extension of repayment period -- interest-free -- not only will be less costly than lawsuits, it also will help debtors recover and honour their obligations.
Education is a sound investment. It helps bridge disparities and prevents a host of social problems. The Student Loan Fund was set up to achieve these goals.
The fund should not forget its noble origins. It must be more than merely a harsh money-lender.
Bangkok Post editorial column
These editorials represent Bangkok Post thoughts about current issues and situations.
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