New law forces reorganization of Student Loan Fund

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The Student Loan Fund must review its management to ensure its sustainability, says Finance Minister Arkhom Termpittayapaisith.

His remark came after the House of Representatives passed an amendment on Wednesday, releasing the lender’s debtors from interest, fines for default and the requirement for a guarantor.

This ruling helps more than 3 million defaulting students avoid legal action.

Mr Arkhom said the fund will need to look at ways to promote repayment discipline among borrowers, which will become essential to the fund’s liquidity once the amendment takes effect.

According to the new law, the fund will no longer receive interest income or fines in case of default, but only the payment of the principal of the borrowers.

The fund, which was established 20 years ago, no longer asks the government for a budget as it uses its own revolving fund to provide student loans, he said.

Loan manager Chainarong Katchapanan said the fund was founded with a 3 billion baht budget from the government. The government has injected an additional 400 billion baht into the fund since the initial allocation.

The fund, which started lending in 1996, has lent a total of 690 billion baht to 6.2 million students. Some 1.6 million students have already finished repaying their debt. The fund has about 1 million borrowers who are taking courses and who have not yet started repaying their debt.

Of the remaining 4.6 million students, about 3.5 million have graduated and are now repaying their loans. However, 2.5 million of them failed to repay their loan by the due date, representing 90 billion baht in principal repayment.

The fund lends around 40 billion baht a year, of which 30 billion a year has been repaid. The fund typically generates revenue of around 6 billion baht per year through a combination of interest at 1% per annum and fines for default.

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