Hundreds of thousands of teachers in Thailand, both working and retired, are suffering under severe debt. At the last count, some 900,000 teachers had incurred a total of 1.4 trillion baht in loans.
The Office of Basic Education Commission (Obec) reports that 2,864 current and retired teachers under its wing have been prosecuted for defaulting on loan payments. Over 100,000 other teachers, including retirees, are spending more than 70% of their monthly salary on repaying loans.
The director of a small state-run school confirmed the scale of the problem, saying she had witnesses for herself how at least one third of her teaching staff were struggling to make ends meet.
“Not only do they owe money to teachers’ savings cooperatives, banks or credit-card companies, they have also borrowed from loan sharks,” she said, speaking on condition of anonymity to protect her school.
The director added that while most teachers take loans to purchase a car, a house or support their families, many young teachers found themselves overwhelmed with debt just from shopping and keeping up with trends.
“Some probably won’t be able to clear their debts before they retire,” she said.
Easy loans to blame?
Authorities have been trying to solve the problem of teachers’ debt for decades. However, their efforts have barely made a dent in the crisis. Also, few teachers can resist relying on loans to make ends meet, simply because it is fairly easy for government teachers to borrow money.
Teachers’ savings cooperatives have so far granted loans worth a total of 890 billion baht. The average rate of interest on repayments is 5.64%. The Government Savings Bank has also approved 349 billion baht in loans to teachers, at an average interest rate of 6.9%. Another major creditor is the Government Housing Bank, which has granted 61 billion baht in loans to teachers at an average rate of 6.4%.
Though there are no official figures available, it is widely believed that loan sharks have also lent huge sums to teachers – and at much higher interest rates.
“Being a civil servant means it is easy for you to get a loan. But for teachers, it is even easier. You can apply for a loan at a teachers’ savings cooperative today and get an approval as well as the money in less than seven days,” a government teacher said.
He has worked as a state-school teacher for nine years and recently borrowed money to purchase a car because he landed a job in a province. Without a vehicle of his own, it would have been tough for him to get around. Also, he refused to live in the dilapidated accommodation that came rent-free with his new job.
Instead, he decided to commute more than 30 kilometers between his school and accommodation he had rented in the nearest town. So, he decided to seek a loan of 400,000 baht from a teachers’ savings cooperative to buy a car.
“Then, I borrowed more money to renovate my parents’ home,” he said.
Identifying himself only as Nid, he said he now had less than 10,000 baht to spend each month because creditors automatically deducted repayments from his salary.
“It is not easy to survive with such little money. Some months, I’ve had to borrow from credit cards. Then when the credit card debt grew too big to handle, I had to borrow from the cooperative again,” Nid lamented.
He said he borrowed more money to cover the cost of his wedding ceremony and reception. Nid and his wife, who is also a government teacher, now have debts of about 4 million baht.
“We think we will be paying them off until we retire,” he said. “However, if the government can lower the interest we are being charged, then life will become a bit easier for us.”
What do indebted teachers want?
Lower interest rates was the most popular answer in a recent survey that asked indebted teachers how their debt problems could be solved, according to an Education Ministry official overseeing debt-restructuring.
“They want the rate of interest to be reduced to a few percent,” the official said. “If the interest was cut, they would have more money for their daily expenses and could avoid incurring more high-interest loans.”
Some teachers were so deep in debt that practically all their salary went towards repayments, the official said.
“Under current regulations, deductions [for repayments] should not exceed 70% of their salary. However, many teachers also have to pay back loan sharks, she said, adding that the debt crisis among teachers is a difficult problem to solve.
Solutions proposed
Dr Kajorn Thanapase, director of the Financial Consumer Protection and Market Conduct Department, Bank of Thailand, and a member of the Education Ministry committee tasked with solving education personnel’s debt problems, reckons solutions are at hand. For instance, he said, interest rates could be reduced because state teachers can offer solid guarantees of repayment.
“Given that creditors can deduct their salaries directly, and the rate of non-performing loans among teachers is as low as 1%, creditors’ risks are very low. Therefore, the interest rate should be no more than 3%,” he said.
He added that teachers’ savings cooperatives should also stop focusing on generating high returns for their members, because they were established to provide teachers with access to soft loans.
Meanwhile, repayments should be capped at 70% of the indebted teacher’s salary, so they can manage their finances without needing to take out more loans.
“Every time an installment is paid, the principal should be lowered,” Kajorn added.
Currently, when a debtor defaults, the resulting penalty plus the instalment with interest leaves the principal debt amount untouched. That’s why some teachers cannot clear their debts even though they work hard all the way up to retirement.
“We may also have to let teachers clear their debts with their mandatory retirement savings. If their debts ease, the prospects for their retirement will improve anyway, as they will be able to avoid paying huge amounts in interest,” Kajorn said.
He added that laws should also be amended to ensure that teachers can keep their jobs even if they go bankrupt.
“As their employer, the Education Ministry should speak up and help these teachers,” Kajorn said. “The ministry needs to ensure that creditors do not treat indebted teachers unfairly.”
However, Kajorn also emphasized that teachers should avoid borrowing just so they can buy the latest gadgets or fashions, which is thought to be a factor in some teachers’ debt problems.
By Thai PBS World’s General Desk
