House Speaker Chuan Leekpai on Monday criticised a proposed amendment to the Student Loan Fund (SLF) Act as an effort to curry favour with voters, saying the fund should come up with ways to promote repayments among borrowers.
His remarks followed approval of the bill by the House to amend the law resulting in interest-free loans for borrowers, no fines for those who default on their repayments and no requirement for a guarantor.
The bill, which has drawn flak from critics that it would lead to more defaults and undermine its liquidity, is pending scrutiny in the Senate. If the Senate rejects it, a joint committee between the two chambers will be set up to examine the bill.
Chuan: Fund created when PM
The move was designed to help defaulting ex-students avoid legal action. According to the loan fund management, about 2.5 million borrowers failed to repay their loans by the due date, accounting for 90 billion baht in principal payments.
Mr Chuan said the fund has faced defaults lately because some education institutions advised students not to repay.
"I knew because a borrower thanked me for the opportunity. I asked them if he completed the debt repayments. He told me he didn't because the university advised him and it is a privately run university.
"If we look at the figures, defaults by students at privately run institutions are high. Finance is important, and so is financial responsibility," he said.
Mr Chuan said the fund, which was established 20 years ago with a three-billion-baht budget when he was the prime minister, was intended to help poor students and it was a success in reducing an education opportunity gap.
When it started lending, the loan fund, which was designed as a revolving fund, was able to cover about 70,000-80,000 students. Currently, it has lent 690 billion baht in total to 6.2 million students.
He said the interest-free loan was deemed to be an attempt to woo votes but he believed interest payment had its merit in that it would promote financial discipline and engagement among borrowers. Moreover, the fund also generated revenue from the interest, which is essential in sustaining its liquidity.
Khunying Sudarat Keyuraphan, leader of the Thai Sang Thai Party, said the amendment was a populist scheme aimed to attract votes without considering its consequences.
She said that instead of focusing solely on interest, loan defaults should be addressed systematically. While loans could be offered, interest-free measures should be in place to encourage people to continue paying off their loan and prevent defaults.