SLF slams student loan forgiveness proposal

SLF slams student loan forgiveness proposal

The Student Loan Fund (SLF) stands to lose up to 6 billion baht per year if the law regulating it is amended to waive loan interest and cancel fines against defaulters, according to the SLF.

The bill to amend the SLF Act cleared the House last month and has now been sent to the Senate for deliberation. Critics say the legislation, sponsored by the Bhumjaithai Party, damages people's financial discipline and undermines the SLF's liquidity.

The SLF bill was among 12 pieces of legislation the party forwarded to parliament on Sept 12, 2019. SLF manager Chainarong Katchapanan yesterday expressed concern over the proposed cancellation of interests and fines, saying the bill should prioritise the security of the fund as a whole.

Designed as a revolving fund, the money offered as SLF loans comes from loans repaid by previous borrowers. The SLF's financial strength hinges on the amount of repaid loans and how effective it manages to lend to the next batch of borrowers. The SLF is concerned that without the interest charge and the defaulter fine, borrowers will not be motivated to keep up with repayments.

Each year, the SLF has about 40 billion baht worth of liquidity. Of this, interest charges and defaulter fines amount to 6 billion baht. The portion of the money would disappear if the SLF Act was amended under Bhumjaithai's plan, weakening the fund's liquidity.

Mr Chainarong said the SLF has been called to testify in front of Senate over the plan. He said he will seek to raise the importance of retaining interest and fines to the Senate's legislative vetting committee.

Since its inception, the SLF has disbursed loans valued at 702 billion baht to 6.2 million students nationwide. So far this year, loans worth 38 billion baht have been approved for 638,132 students. Repayments so far this year amount to 27 billion baht.

Mr Chanarong said money has also been lent to students at 313 schools and education outlets nationwide, both state- and private-run. Some 61% of loans extended are overdue. The 25 best tertiary outlets ranked by student loan repayments are mostly state-run establishments. Topping them is Phayao University, and the only privately-run institute among the 25 is the Panyapiwat Institute of Management.

Do you like the content of this article?
COMMENT (2)