Government tackles student debt amid wider funding debate

More than 25 years after the Thai government’s Student Loan Fund (SLF) scheme for disadvantaged students was introduced, criticism that it has produced many life-time debtors has led to a debt forgiveness campaign – as well as debates about alternative ways to ensure that disadvantaged students can access higher education.

The student debt forgiveness campaign has gathered momentum since the beginning of the COVID-19 pandemic. As a result, the Thai government tabled an amendment bill in parliament to address the issue.

Passed by the House of Representatives, the lower house of parliament, on 14 September 2022, the bill comes before the Senate, or Upper House, in the parliamentary session beginning in November 2022.

Under the amendment the government will provide interest-free loans for borrowers, no fines for those who default on their repayments and no requirement of a guarantor – many of whom have had to fork out thousands of baht to bail out debtors.

The changes will save some 3.4 million defaulting Thai students from legal action for non-payment of debt. Approximately a million defaulters are currently being prosecuted by the government’s SLF.

Election ploy?

Campaigners for debt forgiveness argue the debts are not only a burden on former students, but also create inequality in society. However, critics have called the bill an “election ploy” and have likened it to US President Joe Biden’s popular student debt cancellation plan facilitated by an executive order in August 2022.

After the amendment bill was passed in the Thai Lower House last month, House of Representatives Speaker Chuan Leekpai, in an interview with the English-language Bangkok Post newspaper, said it was legislation intended to curry favour with voters. He said the fund should instead come up with ways to promote repayments among borrowers.

The SLF, however, will continue to exist.

“It is a campaign to abolish debtors, not the fund. They [campaigners] want debtors not to pay the debt. They want the government to fund the debtors instead,” Pattama Vilailert, an English language teacher and a tourism consultant in Bangkok told University World News.

“Since the COVID-19 pandemic in 2020, many people are unemployed [and] SLF has continuously issued measures to help borrowers,” she noted.

Fall in debt repayments

Debt repayment has fallen due to the pandemic and owing to the fund’s move to reduce the monthly debt repayment amount to alleviate the repayment burden. In August, the annual survey of the University of the Thai Chamber of Commerce, a private institution in Bangkok, showed that Thai households are struggling with the highest levels of debt in 16 years.

Other reasons behind defaults include inflationary pressures and the tendency among debtors not to regard repayment of debt as a priority.

According to the loan fund’s management, out of 6.4 million borrowers about 2.5 million failed to repay their loans by the due date, accounting for THB90 billion (US$2.3 billion) in principal payments.

At the time the SLF was established with capital of THB3 billion over 20 years ago, when Chuan Leekpai was prime minister, it was intended to be a revolving fund with repayments helping to continue the scheme.

In 1997, at the height of the Asian financial crisis, the Asian Development Bank (ADB) forced the Thai government to cut higher education subsidies in order to receive loan assistance from the bank. Government subsidies to universities were reduced and students were forced to pay higher fees.

Reducing the education opportunity gap

To make university education accessible to disadvantaged families, the Thai government at the time introduced the SLF to provide loans.

Chuan Leekpai maintained it was intended to help poor students and that it was successful in reducing the education opportunity gap. He said the current amendment to the SLF Act would pave the way for more defaults and undermine the fund’s liquidity.

He also accused private universities of encouraging their students not to pay back the loans.

“If we look at the figures, defaults by students at privately-run institutions are high. Finance is important, and so is financial responsibility,” argued Chuan Leekpai, who believes more should be done to encourage loan repayment.

Dr Kamolrat Intaratat, director of the Research Center of Communication and Development Knowledge Management at Sukhothai Thammathirat Open University, believes the student loan scheme has been beneficial to those from lower income groups.

“It's a must because it can help a lot of students who don't have money … it makes a dream possible for marginalised students,” she told University World News, adding: “If there was no loan, it would be impossible for them to get into the university system.”

Calls for radical rethink

There are now calls for a more radical rethink of university funding and assistance to students while they are still at university, rather than cancellation of the accumulated debt. However, it is far from clear how increased university subsidies from the government or ‘free’ higher education would be funded.

Campaigners for loan forgiveness are also pushing to extend free education from primary and secondary level to university education, which some argue could be cheaper for the state than debt write-offs of what was originally a taxpayer-funded student fund. The soft loan fund no longer receives any government capital.

Prim Maneechote, a member of the #SLFdebtforgiveness campaign, believes the amount in the budget Thailand has set aside to reduce inequality exacerbated by the pandemic – THB700 billion (US$18 billion) over and above welfare payments – should be “more than enough” to ensure higher education is free.

She said if most of that inequality funding is directed towards making universities free, it would tackle inequalities better. Free education would mean marginalised students would not need to take out loans. “Why do young people have to take loans just because they want to study?” she asked in a recent media interview.

Pumsaran Tongliemnak, acting director of the Equitable Education Research Institute, said it would be good if the government could offer free higher education to all citizens, but acknowledged it could be difficult to implement.

During a special feature aired recently by the Thai PBS network on the SLF issue, he said when ADB loan conditions led to the SLF scheme, “at the time, many economists and educators did not believe the education of 1.4 million Thai university students had to be subsidised, arguing that most families could afford to pay.

“[But] since then, the cost of studying at university has risen sharply. Over the past few decades, university tuition fees have jumped significantly,” he noted. “So, I think it is difficult to push the government to start paying for people’s higher education.”

However, the SLF needs “a little tweak” such as lifting the heavy penalties imposed on defaulters, he said.

A different education system

Sukhothai Thammathirat Open University’s Intaratat said the situation had changed a lot in recent years.

“Even if universities are free, not many youngsters would like to study. Now students want to earn money, get a job. Most of them prefer short courses, quick-win courses like graphic design,” she noted. “We have to design a different education system. The [education] ministry is now encouraging universities to devise alternative pathways.

One of the schemes being considered in Thailand is to allow young people to go into a job straight after school. They would accumulate credit points for work experience and knowledge gained on the job that could be stored in a “credit bank” to be used later if they want to go for higher education, Intaratat said.

This could reduce the period they need to spend at university to get a degree, say, from four to two years and students would have the money for university education, having saved for it while working.

Some work experience and knowledge gained from work that might be recognised as equivalent to certain university modules at university could reduce the time it takes to get a degree, and therefore the cost.

“[The] young generation says: Don't lock me in university for four years; I don't like it anymore. If they get a job and they have money they can learn any time … they are happy because they will have enough money,” noted Intaratat.

“The university system is being disrupted,” she concluded, pointing to new part-time paths to a degree.