EDITORIAL BANGKOK POST: Honour your student debts

One of the weak points of many Thais is lack of responsibility such as when they default on student loan repayments. A number of these cases has manifested itself publicly recently.

The Student Loan Fund (SLF) could easily be the state lender with the highest number of borrowers who default on their repayments.

Since its launch in 1998, the fund has granted loans worth more than 600 billion baht to 6 million students from low-income backgrounds. Despite the fund’s provision of flexible terms for repayment and low-interest rates, there are about 100,000 default cases filed with the court each year.

So far about 1.1 million defaulted borrowers with accumulated loans worth more than 54 billion baht have been prosecuted and another 1.1 million defaulted borrowers with total loans of about 20 billion baht have yet to be charged.

Surprisingly, most defaulters have graduated from university and possibly are now in jobs.

Last Thursday, a group claiming to be representatives of SLF borrowers submitted a petition to opposition leader and Pheu Thai Party leader Sompong Amornvivat asking him to help solve their debt burden.

They called on the SLF to waive payment of interest, accrued fines and fees, and grant them a 15-year period for loan repayments in instalments.

They also asked the fund to halt its process of seizing the assets of defaulters and using the money they had earlier paid as fines to offset some of the outstanding debt.

Adisorn Piangket, a spokesman of the opposition leader, backed the group, saying the SLF’s goal is to promote human resource development and education. As a result, the fund’s debtors should not be treated the same as those borrowing from commercial lenders.

It is right the SLF borrowers should not be subject to repayment conditions as strict as those imposed on borrowers of commercial banks.

And defaulters should not lose their homes just because they cannot afford to pay back the outstanding debt in full. But any debt restructuring plan, if given, should not be treated as a ticket for them to be lax on repayment.

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The importance of debt repayment is the fact that the SLF needs to have sufficient money to support other students from low-income families who borrow funds.

The SLF is, in fact, one of the lenders providing the softest loans. Its annual interest rate is only 1%, compared to 6.9% as the minimum retail rate and more than 8% as the personal loan rate offered by commercial banks. It currently also has a promotion to cut 75% of fines and extend the repayment period to 15 years.

It is clear that the fund’s debtors are treated differently from borrowers of commercial banks and they should try to their best to pay back the loans.

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There are several reasons behind the student loan defaults including debtors’ low income and the SLF’s lenient penalty and ineffective debt collection. But another important reason is debtors’ lack of both financial discipline and a sense of responsibility. Many of them give student loan repayments a low priority.

Recently, some MPs made headlines for having outstanding debts to the SLF. One said he did not default but wanted to take the full 15 years for repayment under the fund’s criteria. He has done nothing wrong but it would be good if he could set a good example by trying to repay the student loan as soon as he can as his MP’s salary is decent enough for him to do so. Doing so could also send a message to other borrowers to give their repayments a higher priority.