Permafrost is a temperature-sensitive geological formation characterized by low elasticity and high plasticity. Inappropriate engineering design during borehole drilling in permafrost can result in the collapse of surrounding strata. To evaluate the stability of borehole walls, a finite element model was developed based on the inherent physical properties of permafrost. This model was utilized to investigate the thermal, stress, and plastic yield zone evolution around the borehole during drilling with normal-temperature fluids. The borehole expansion rate was employed as a quantitative measure to assess wall stability. The analysis reveals that the strata adjacent to the borehole, when drilled with normal-temperature fluids, experience thawing and yielding, with secondary stress concentrations in unthawed strata driving the progressive expansion of the plastic zone. The degree of plastic deformation diminishes with increasing distance from the borehole. Consequently, the borehole expansion rate was utilized to evaluate collapse risk under varying conditions, including permafrost thickness, depth, plastic strain thresholds, and drilling fluid densities. The findings suggest that normal-temperature drilling fluids are appropriate for thin permafrost layers, whereas for thicker permafrost, adjustments in drilling fluid density are required to ensure the stability of borehole walls due to the elevated temperatures and geostress at greater depths.