Repayments under Student Loan Fund to be recalculated
Thailand has begun to address the issue of household debt, starting with monies owed under the Student Loan Fund (SLF).
Kittirat Na Ranong, chief advisor to the Prime Minister and chairman of the committee overseeing the resolution of debt, said on Tuesday that the approach to addressing the debt issues of the Student Loan Fund (SLF) had been approved at the committee’s first meeting and that the debt burden of current borrowers would be calculated in line with the provisions of the Student Loan Fund Act (No 2) of 2023, which has been in effect since March 20, 2023.
“The SLF group will be the first group to receive assistance in resolving their debt burden. Assistance will then be expanded to cover borrowers from other groups throughout the entire system,” Kittirat said.
Lavaron Saengsnit, undersecretary of the Ministry of Finance, stated that under the new law, the debt burden of SLF borrowers would be newly calculated and the sequence of interest deductions adjusted, starting with deducting the loan principal for those who have been making repayments.
Subsequently, the newly accrued interest will be deducted, followed by overdue interest. This adjustment will result in a faster reduction of the principal compared to the previous method.
This round of debt calculations is expected to cover approximately 3.5 million borrowers who are still in debt to the SLF after the enforcement of the Student Loan Fund Act (No. 2) of 2023,
“With these recalculations, the debt burden for borrowers who have been making repayments will significantly decrease. Some borrowers who are still in the process of repayment may have their debts fully cleared and closed after the recalculation,” Lavaron said.
SLF debt has been a significant factor contributing to the rise in household debt in Thailand.
The group of borrowers under the age of 30 still carries a concerning debt burden, as evidenced by household debt figures for the first quarter of 2023 from the Bank of Thailand.
It was found that outstanding debt amounted to 16 trillion baht, equivalent to 90.6% of the GDP. Of this, SLF debts accounted for approximately 4.83 trillion baht or around 4% of total household debt.
The groups experiencing increased debt repayment challenges after COVID-19 include individuals aged 50-60 and those below 30. Within the latter group, some may still have outstanding debts, including SLF debts.
Data also reveals that individuals under the age of 30 fall into the Special Mention Loans (SML) category, which refers to debts that are overdue for 1-3 months, with a high non-performing loan (NPL) ratio of up to 20.8% of total credit.
These debts are often associated with consumer spending, contributing little to no income generation.
On June 6, 2023, the Commerce Ministry’s Economic and Trade Index Office released a report on household expenditures for May 2023. The report revealed that the overall household expenditure averaged 18,023 baht per month.
At the same time, according to the National Economic and Social Development Council, the average wage for the second quarter of 2023 was 15,412 baht per person per month.
This implies that the average monthly income is lower than household expenditures by over 2,600 baht per month, and this does not even include the burden of debt.
