Analysis of Problems on Student Loan Defaults in Thailand and Guideline Solutions

Abstract

The purpose of this study is to examine the causes of Thai Student Loans Fund (SLF) defaults, analyze problems and their effect on the stakeholders, and guideline solutions. This is a documentary research with data collected from previous researches, articles, news, and other published materials. The collected data was limited from only 1995-2013 and was analyzed by using inductive analysis. The research findings related to the causes of defaults for repayment of SLF were: (1) Unethical mind of borrowers; financial problems due to unemployment after graduating in the low market demand career and lesser job opportunities; economic, social and cultural problems due to low income with a high burden of supporting and feeding the family members. (2) Personnel in Financial Aid & Scholarship Divisions of high vocational schools and universities involved with screening and granting loans are dishonest and do not strictly conform to the rules and policies, coupled with commercial concentration of institutions rather than focus on the ability to study in proper faculties which have more potential for jobs with higher earnings to help repay debts after graduation. (3) Lack of updated and complete data base of borrowers, lack of systematic and proper information pool which hinders follow ups and leads to miscommunications. (4) Inefficiency in not only procedures and policies of allocation and distribution of SLF but also in the systems used in collecting the loan repayments.The guideline solutions for solving defaults in loan repayments are: (1) Inculcating sense of ethics and moral to student borrowers by (a) educational institutions must educate them with an ethics course, (b) the students loan SLF management team must implement ethics training sessions in the meetings conducted before and after granting loans, convey knowledge and understanding of the policies and procedures in using the funds and repayment of loans that need to be strictly followed, awareness of the strong punishments in monetary and non-monetary terms such as black listing of names in the credit bureau system; (2) Characteristics of implementing agencies with the right organizational structure: less bureaucracy with professional workers, open communication, leadership, teamwork, organizational culture, strategic plan, monitoring and public performance evaluation plan with pre-post evaluation applied to each factor to inform all stakeholders, along with an ongoing process of monitoring; (3) Proper and systematic procedure in repayment of loans which are accurate, updated, and with verifiable data pool among granter, employer, revenue department, debt collector, and educational institutions by (a) using an identity code for borrowers for recording all procedures which facilitate auditing and follow ups, (b) modify the software to make it more flexible for early payment, (c) set policies to motivate and provide more incentives for early repayment of debts and on time repayments, (d) asking other implementing agencies such as the Social Security Office and employers to provide SLF delinquent debtors’ salary information, and authorize the Thai Revenue Department to collect SLF debt payments, (e) increase repayment channels via post office, (f) Using bar code system to facilitate and make more accurate the payment system and to keep the data base more efficient and effective.