The Student Loan Fund (SLF) should stop its fierce pursuit of those who cannot pay their debts on time.
Given the Covid-19 pandemic and the worst economic downturn in decades, it would certainly be best if the fund urgently looked for ways to help jobless and debt-ridden graduates get back on their feet.
The House of Representatives is updating the Student Loan Fund Act to improve its services and efficiency. It is hoped that any amendment will make the best interests of students the fund’s priority, not the pursuit of punitive measures, inflexible rules and organizational rigidity – all of which stem from its persistent bias against defaulters as contrary to the ethical and financially irresponsible.
According to a study by Kajorn Thanapase, Director of Financial Consumer Protection and Market Conduct Department, Bank of Thailand, the SLF has the highest rate of non-performing loans in the country with over 2.3 million defaulters. out of 6.4 million borrowers.
According to the study, the crux of the problem is not borrowers’ lack of financial discipline, but the fund’s rigid and unsympathetic repayment structure and high interest rates that are turning millions of borrowers into default.
For example, graduates are entitled to an interest-free grace period of only two years. After that, they are required to pay an annual installment at a high interest rate which increases every year. For those who miss a payment, the next payment is at an even higher interest rate; if the conditions cannot be met, the result is default. If debtors cannot pay within the required 15 years, then they face lawsuits and life hardships, including the fund harassing their employers.
The SLF complains of a lack of funds to support new borrowers. Yet its pursuit of defaulters costs the fund more than 1 billion baht a year in legal fees. Lawsuits are expensive, long and unsuccessful. Otherwise useless: the majority of defaulters cannot pay because they are in financial difficulty and unemployed, not because they want to cheat.
An example is Sunisa (surname omitted). The court decided that she had to pay the SLF 5,000 baht per month in 97 installments. Sunisa only earned 9,000 baht per month. How could she take care of her sick daughter and parents on only 4,000 baht a month? The SLF also obliges employers to deduct reimbursements from debtors’ salaries without taking into account their hardship. Is the purpose of the fund to help or hurt?
It would be better to use the billion baht to set up programs to help defaulters overcome their difficulties, as well as to help them retrain and get better jobs so they can meet their loan obligations. .
Real change requires the SLF to set its rigid rules and regulations. For example, the fund should stop charging high interest.
It was created to help poor students get higher education, not to make a profit. Also, repayment schedules should be more flexible and repayment periods should be extended from the current 15 years.
Change is possible if the SLF stops viewing its clients as criminals and instead as a disadvantaged group trapped in a punitive system that needs support to survive in a society plagued by inequality.
The fact that many defaulters are unemployed or stuck in low-paying jobs reflects the gap between the education system and labor markets.
Rather than just providing loans and prosecuting defaulters, the SLF should work with other sectors of society to connect students to the job market.
According to the 2017 constitution, the government has an obligation to support the SLF budget to close education disparities. The SLF should then stop saying that it must prosecute defaulters in order to be able to support new students in need.
The fund needs a database to locate graduates who are still trapped in difficulty. Moreover, a debt restructuring program with an extension of the repayment period – without interest – will not only be less costly than legal action, but will also help debtors to recover and honor their obligations.
The fund should not forget its noble origins. It must be more than a stern money lender.
Bangkok Post editorial column
These editorials represent the Bangkok Post’s thoughts on current issues and situations.
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