Designed to Default? Repayment Burden and Default Risk Under Thailand’s Mortgage-Type Student Loans, and the Case for Income-Contingent Reform

Thailand’s Student Loans Fund (SLF) lends on a mortgage-type basis: borrowers repay fixed, time-escalating fractions of principal regardless of realized income. This paper asks how that design distributes financial stress across borrowers and what it implies for fiscal recovery. Using Mincerian age–earnings functions estimated on the 2022 Thai Labor Force Survey and administrative loan parameters, I build a Monte Carlo microsimulation of 400,000 synthetic borrowers and trace each cohort’s repayment burden, scheduled repayment as a share of annual income, over the fifteen-year term. The step-up schedule raises the median bachelor’s-degree borrower’s burden from about 4 percent of income in the first year to 15 percent in the fifteenth, and to roughly 39 percent for the lowest-earning decile; 35 percent of bachelor’s borrowers, and 65 percent of non-completers, breach a 20 percent severe-burden threshold. This affordability-driven stress is concentrated among low earners and non-completers and is steeply regressive. A counterfactual income-contingent loan caps the burden and removes affordability default, and when appropriately parameterized it recovers as much as the mortgage schedule. A utility-based model shows that aggregate collection follows a Laffer curve in repayment stringency, which income contingency removes. The findings reframe SLF default as a product of loan design rather than borrower irresponsibility.