Govt throws lifeline to 3.4m indebted students
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Govt throws lifeline to 3.4m indebted students

A bank employee explains to students how they can repay student loans through a QR code. (Bangkok Post file photo)
A bank employee explains to students how they can repay student loans through a QR code. (Bangkok Post file photo)

The House on Wednesday passed an amendment bill freeing Student Loan Fund debtors from interest, default fines and guarantor requirements, saving 3.4 million students in default from legal action.

The bill would amend the Student Loan Fund Act, which imposed interest penalties, fines for defaults and third parties to guarantee the loan would be repaid. 

The amendment, proposed by a group of Pheu Thai lawmakers led by Lop Buri MP Ubolsak Bualuangngam, was passed by 218 votes to 109 in its second reading and 314 votes to three in its third reading.

The bill would apply retroactively to the borrowers and guarantors who sealed student loan agreements before the promulgation of the legal amendment.

The Senate will consider the bill in the next parliamentary session that starts on Nov 1.

About 3.4 million students were facing legal action, with about 1 million of them already sued. The amendment would set them free of the prosecution.

Paradon Prissananantakul, Bhumjaithai MP for Ang Thong, said even if the student loans were to be free from interest penalties and the guarantor requirement, the Student Loan Fund could continue to exist.

The fund amounted to about 300-400 billion baht and good management would let it remain, he said.

The present law set the maximum interest rate for student loans at 7.5% per year, but in practice the fund management charged 1%. During the Covid-19 pandemic, it cut the rate to 0.01%.

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 in 1998. 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 currently in a grace period for repayment. Another 3.52 million borrowers with combined loans worth 450 billion baht 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.

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 payments for borrowers.

The fund expects total debt repayment of 32 billion baht this year. It tallied bad debts amounting to 82.8 billion baht last year. Each student can borrow up to 200,000 baht per year.

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