Thai student loan crisis threatens to shatter futures – and social mobility

As many as 630,000 students are relying on the Student Loan Fund (SLF) for their studies this academic year – but this lifeline for their futures is hanging by a thread amid a deepening financial crisis.

“If the SLF falls, students who require loans will be at risk,” noted ParameeWaichongcharoen, an opposition People’s Party MP.

As of December, 64.4% of students under the SLF had defaulted or fallen behind on repayments. The SLF incurs an average financial loss of 11.24 billion baht each year.

The SLF was launched in 1996 with a government budget of 400 billion baht and a mission to provide low-interest loans to expand educational opportunities across all income groups in Thailand. Established as a revolving fund, the SLF requires repayment from its debtors to finance its operations and extend loans to the next intake of students.

Over 7.16 million Thais have taken student loans since the fund was created almost 30 years ago. Of this number, about 3.58 million are currently in the repayment period, with only 1.8 million having cleared their debt completely.

The burden of non-performing loans (NPLs) carried by the fund is now even higher than the 47% recorded during Thailand’s financial crisis of 1997.

As of March, the SLF was owed 97 billion baht in overdue payments. While some debtors have the excuse of struggling to make ends meet, many others reportedly fail to make repayments due to a lack of financial discipline.

Can it survive this year?

SLF manager Nantawan Wongkachonkitti has assured students they will receive their loans in full this academic year because SLF’s revolving cash flow is still healthy.

“We are receiving repayments every single day,” she said.

Nantawan shrugged off a 2024 SLF report estimating its fund would plunge into the red this year, saying that this was a worst-case scenario. “That won’t happen,” she insisted.

Falling Revenue, Soaring Expenses

Reporting to a parliamentary committee, the SLF revealed that its income had dropped by10.3% from fiscal year 2019 to 2021 –and fell by the same amount from 2022 to 2024.

It partly blamed the decline on a new law that slashes interest and penalty rates while also changing the method for deducting the principal loan in favour of debtors.

SLF’s expenses also soared 43.3% between the period from 2019-2021 and 2022-2024, with annual outgoings reaching as high as 40.68 billion in the last few years.

Worse still, the fund estimates expenses will surge to 72.83 billion baht this fiscal year (2025) – about 80% higher than its income.

Compliance with the new law, which was passed in 2023, means the SLF will not only lose revenue from reduced interest on loans but will also be required to refund money to some borrowers.

Lowered interest charges and penalties will require the SLF to return up to 6 billion baht to lenders.

Meanwhile, the government has turned down SLF’s request for a budget of 22 billion baht to cover its operational costs in fiscal 2026, which starts in October. Instead, it has allocated less than a quarter of the amount requested – just 5.1 billion baht.

“The SLF will fall short of funds [next year] because even if it is able to collect repayments in full, the income will not be enough to cover all its expenses,” Paramee said.

Impacts on students?

Given the national importance of the SLF, Paramee believes that the government will eventually step in to top up its budget later and ensure its continued operation.

Deputy Finance Minister Julapun Amornvivat has commented that the limited budget handed to the SLF was meant to stimulate improved performance – a policy opposed by the opposition MP.

“I think the government should find an alternative way to shake up the SLF,” said Paramee, who is worried about the impact on students.

This academic year, the SLF will restrict loans to medical, nursing, pharmacology and dentistry students from families who earn less than 360,000 baht a year. Family income was not a criterion for loan eligibility in these fields in previous years.

“The change of conditions is likely due to budget constraints,” Paramee said.

However, the SLF has insisted that it has added the family-income condition because most students in these programmes hail from relatively well-off middle-class backgrounds.

Paramee says this explanation is unconvincing, given that SLF has not extended the new criterion to students enrolling on engineering, artificial intelligence, and electric vehicle-related courses.

Management (in) efficiency

Paramee said the SLF funding crisis signalled problems with its management, or else it would not be facing cash-flow issues and such a high level of bad debt.

“Today’s crisis stems from the failure of past solutions,” the MP said, stressing that the SLF is in urgent need of an overhaul because it manages the taxpayers’ money.

She called for professional administrators to be installed to manage its operations for greater efficiency and transparency.

In addition to problems collecting debts, the SLF has also failed to update debtor information in line with the new loan conditions, she said.

Despite two years having passed since the enactment of the Student Loan Act B.E. 2566 (2023), the update has not yet been completed.

The SLF also stands accused of failing to promote improved loan conditions available to recipients who come forward for debt restructuring.

Since February, borrowers have been able to restructure their debts online, freeing them from the need to travel to the SLF office in Bangkok.

Travel expenses and inconvenience are believed to be major reasons why many have continued to default.

As of last month, 261,462 loan recipients had signed debt restructuring contracts at the office, while 401,248 had completed the process online.

Debt restructuring lowers their monthly instalments and removes guarantors’ obligations. The repayment period can also be extended by 15 years, up to the age of 65.

Upon clearing all debts, any penalties incurred will be waived.

While crucial to the SLF’s financial health, debt restructuring will only be effective if borrowers are aware of it, Paramee said.

“If debt-restructuring deals are promoted more effectively, more people will likely come forward to begin repayments.”