Thailand’s Student Loan Fund: An Analysis of Interest Rate Subsidies and Repayment Hardships

This paper presents analysis of the implicit subsidies and repayment hardships of Thailand’s Student Loan Fund (SLF). Comparisons are made between the current SLF with alternative similar schemes, assuming different rates of interest and loan repayment periods. We find that the implicit interest rate subsidy is about 66 per cent, with much of this being due to the fact that the scheme charges only a 1 per cent per annum nominal interest rate. The repayment hardships, measured as the proportion of a graduate’s income allocated to servicing the debt, are around 4 and 3 per cent, for female and male graduates earning average incomes by age. However, these increase to 12 and 10 per cent for female and males whose earnings are in the bottom deciles. The current SLF is generous in terms of repayment hardship for the borrowers. However, the scheme appears to be unsatisfactory in terms of the extent of implicit subsidies.can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.