Government tackles student debt as part of broader funding debate
More than 25 years after the introduction of the Thai government’s Student Loan Fund (SLF) scheme for disadvantaged students, criticism that it has produced many lifelong debtors has led to a debt cancellation campaign – as well as debates on alternative means of ensuring that disadvantaged students can access higher education.
The campaign to cancel student debt has gained momentum since the start of the COVID-19 pandemic. As a result, the Thai government has tabled an amendment bill in parliament to address the issue.
Passed by the House of Representatives, the lower house of parliament, on September 14, 2022, the bill is presented to the Senate, or Upper House, during the parliamentary session beginning in November 2022.
Under the amendment, the government will provide interest-free loans to borrowers, no fines for defaulters and no guarantor requirements – many of whom have had to shell 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. Around one million defaulters are currently being prosecuted by the government’s SLF.
Debt cancellation campaigners argue that debts are not only a burden on former students, but also create inequalities in society. However, critics called the bill an ‘election ploy’ and compared it to popular US President Joe Biden. student debt cancellation plan facilitated by a decree in August 2022.
After the Amendment Bill was passed in the Thai Lower House last month, Speaker of the House of Representatives Chuan Leekpai, in an interview with the English-language newspaper Bangkok Post newspaper, said it was legislation intended to curry favor with voters. He said the fund should instead find ways to promote repayments among borrowers.
The SLF will however continue to exist.
“It’s a campaign to abolish the debtors, not the fund. They [campaigners] want debtors not to pay the debt. They want the government to finance debtors instead,” said Pattama Vilailert, an English teacher and tourism consultant in Bangkok. Academia News.
“Since the COVID-19 pandemic in 2020, many people have been unemployed [and] The SLF has continuously issued measures to help borrowers,” she noted.
Fall in debt repayments
Debt repayment has declined due to the pandemic and the fund’s decision to reduce the monthly debt repayment amount to ease the repayment burden. In August, the annual survey by 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 for defaults include inflationary pressures and the tendency of debtors to not view debt repayment as a priority.
According to the management of the loan fund, out of 6.4 million borrowers, about 2.5 million have not repaid their loans by the due date, which amounts to 90 billion baht (2.3 billion dollars). ) in repayment of principal.
When the SLF was established with a capital of THB 3 billion more than 20 years ago when Chuan Leekpai was Prime Minister, it was intended to be a revolving fund with repayments helping to continue the program.
In 1997, at the height of the Asian financial crisis, the Asian Development Bank (ADB) forced the Thai government to cut subsidies for higher education in order to receive loan aid from the bank. Government grants to universities were cut and students were forced to pay higher tuition fees.
Closing the education opportunity gap
To make university education accessible to underprivileged families, the Thai government then introduced the SLF to provide loans.
Chuan Leekpai maintained that it was intended to help poor students and had succeeded in bridging the educational opportunity gap. He said the current amendment to the SLF Act would pave the way for more defaults and undermine the liquidity of the fund.
He also accused private universities of encouraging their students not to repay loans.
“If we look at the numbers, student defaults in private institutions are high. Finances are important, as is financial responsibility,” said Chuan Leekpai, who believes more should be done to encourage loan repayment.
Dr. Kamolrat Intaratat, director of the Research Center for Knowledge Management in Communication and Development at Sukhothai Thammathirat Open University, believes that the student loan program has been beneficial for people from low-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 marginalized students,” she said. Academia Newsadding: “If there was no loan, it would be impossible for them to enter the university system.”
Calls to radically rethink
There are now calls for more radical rethinking of university funding and student aid while they are still in college, rather than the cancellation of accumulated debt. However, it is far from clear how increased government subsidies to universities or “free” higher education would be funded.
Loan cancellation campaigners are also pushing to expand free education from primary and secondary to university education, which some say could be cheaper for the state than canceling the debt of which was originally a taxpayer-funded student fund. The subsidized loan fund no longer receives government capital.
Prim Maneechote, a member of the #SLFdebtforgiveness campaign, believes that the amount of budget Thailand has set aside to reduce inequalities exacerbated by the pandemic – 700 billion baht ($18 billion) on top of social benefits – should be “more than enough” to guarantee free higher education.
She said if most of this inequality funding went to making universities free, it would do a better job of tackling inequality. Free education would mean that marginalized students would not need to take out loans. “Why do young people have to take out 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 provide free higher education to all citizens, but acknowledged that this could be difficult to implement.
In a recent special report by Thailand’s PBS network on the SLF issue, he said that when AfDB loan conditions led to the SLF program, “at the time, many economists and educators did not believe not that the education of Thailand’s 1.4 million university students should be subsidized, 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 increased dramatically,” he noted. “So I think it’s hard to push the government to start paying for people’s higher education.”
However, the SLF needs “a small adjustment” such as the lifting of heavy penalties imposed on violators, he said.
A different education system
Intaratat of Sukhothai Thammathirat Open University said the situation has changed a lot in recent years.
“Even if universities are free, few young people would like to study. Now students want to earn money, find a job. Most of them prefer short courses, quick earning courses like graphic design,” she noted. “We need to design a different education system. The [education] The ministry is now encouraging universities to design alternative pathways.
One of the measures envisaged in Thailand consists of allowing young people to access employment immediately 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 pursue higher education, Intaratat said.
It could reduce the time they have to spend in college to get a degree from, say, four to two years and the students would have the money for college education, having saved for it while working.
Some work experience and knowledge acquired through work that could be recognized as equivalent to certain academic modules at university could reduce the time needed to obtain a degree, and therefore the cost.
“[The] the younger 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 anytime…they are happy because they will have enough money,” Intaratat noted.
“The university system is disrupted,” she concluded, pointing to new part-time paths to a degree.