Student loan crisis getting worse in Thailand
by Steve Suwannarat

Originally set up for 70-80,000 students, a loan fund has benefitted up to 6.2 million beneficiaries but many cannot pay back. A bill to provide interest-free loans to students has put the spotlight on household debt, which is currently at its highest in the last 16 years. Critics argue that the situation risks becoming unsustainable for the state coffers.

Bangkok (AsiaNews) – A student loan bill approved by Thailand’s House of Representatives pending before the Senate has sparked debate, generating a broader critique of government policies, deemed inappropriate and seemingly designed to curry favours with voters at the expense of the public purse.

The bill in question would provide interest-free loans for borrowers and no fines for those who default on their repayments. According to former Prime Minister and current House Speaker Chuan Leekpai, this has negative implications.

Many educational institutions already try to minimise the negative consequences for students who have problems in paying off their debt.

When Chuan was prime minister (1997-2001), a student loan fund was set up with a budget of three billion baht (US$ 80 million) able to help 70-80,000 students.

Since then, the fund has grown exponentially, both in terms of funding and number of beneficiaries, 690 billion baht (US$ 18.6 billion) for 6.2 million students.

Out of those, some 2,5 million have been unable to repay their debt, which is part of a broader problem of private debt.

According to the Bank of Thailand, the country’s household debt now stands at 89.2 per cent of GDP, slightly less than in the previous two years but with a lower GDP.

In August, the annual survey of the University of the Thai Chamber of Commerce showed that Thai households are struggling with the highest level of debt in 16 years with an average load of about half a million baht (US$ 13,500).

Debt rose by almost 4 per cent over the previous year with 99.6 per cent of respondents saying they are in debt.

This is only partly due to the stagnation caused by the pandemic. Other factors that favour indebtedness are easy credit, insufficient income at a time of rising cost of goods and services, the greater propensity to purchase durable goods, and the need for money for investments.

The picture is not entirely bad because it reflects known situations, but it could get out of hand if Southeast Asia’s second-largest economy misses its growth objectives amid uncertain economic conditions.