Financing student loans in Thailand: Revolving fund or open-ended commitment?

A student loans scheme (SLS) came into effect recently in Thailand, covering both upper secondary and tertiary level schooling. The central objective of the scheme is social - to increase access of poor students and to prevent student dropout. The loans scheme is highly subsidized owing to the extremely favorable repayment conditions, which in turn calls into question the longer-term financial viability of the scheme. The average repayment ratio on loans is only about 20%, while an overall loan recovery, taking into account repayment default and administration costs, is 10% or less. It is recommended that the loans scheme for the upper secondary schooling be converted to a grants scheme; alternative reforms are suggested to raise the average repayment and recovery ratios on loans for tertiary level students, closer in line with international experience.