Demographic crisis leaves universities in financial bind

'There just aren't enough students to go around,' administrators say

by David Mcneill and Chie Matsumoto

The first day of the semester should be one of the year’s busiest, but it is immediately clear at St. Thomas University that something is badly wrong.

Apart from a sprinkling of students chatting near the entrance, the grounds are eerily quiet — the atmosphere seems more like that of a retirement home than a bustling city campus. Footsteps echo off the walls of empty corridors. Students huddle around professors at the front of nearly empty classrooms.

This small private college near Osaka was struggling long before announcing last summer it was no longer accepting freshmen. Established in 1962, St. Thomas carved out a niche among its bigger, more prestigious local rivals by focusing on literature and foreign-language studies.

But enrollment has been falling for a decade, hit hard by the demographics crisis that threatens to overwhelm the world’s second-largest higher education sector. Simply put, Japan is running out of 18-year-olds.

According to the education ministry, 46 percent of the nation’s roughly 550 private universities are missing their recruitment targets, the highest level ever. More than 40 percent are reportedly in debt and many are a bank loan away from the fate of St. Thomas and the four other colleges that stopped accepting students this year.

“There are many more universities like this,” warns Teiji Kariya, director of the university’s office of the president. “We are the tip of the iceberg.”

Worse-case scenarios forecast that one-third of all private universities could go bankrupt or merge in the next decade unless help is forthcoming. But the government has so far taken a laissez-faire approach, refusing to either rescue or pull the plug on failing colleges.

In the meantime, the enrollment crisis has reached “ridiculous” proportions, says Bruce Stronach, dean of Temple University’s Japan campus. “The government must decide very soon. Those colleges that are going to die should die.”

In the absence of government intervention, universities across Japan, especially outside the major urban areas, are struggling. Faculty pay has been frozen or cut, bonuses have been suspended and resources trimmed to the bone. Short-term contracts for professors are increasing. Thousands of students from China are being recruited to pay fees and fill empty classroom seats.

At some institutions these students are failing to turn up for lectures, using their visas instead as cover while they go out and work. An assistant professor at Aomori University says about half the students in some departments are Chinese.

“A lot are working more than they are studying,” said the professor, who requested anonymity. “The school doesn’t acknowledge there is a problem because the administration just wants to fill up the classrooms.”

The demographic impact has rippled through each layer of the education system, shutting elementary, junior high and high schools and now finally reaching colleges. Since peaking in 1992 at 2.1 million, the number of 18-year-olds has plummeted by more than 720,000.

“There’s a lot of bitterness about this,” says Martin Weatherby, an associate professor in St. Thomas’ Human Development department. “We knew 10 years ago that 2009 was the crunch year — everybody in Japan knew that.”

Some in the industry blame the government’s adherence to free-market fundamentalism for ignoring the looming population fall and continuing to crank out licenses to private universities. The private university sector has grown by a third since the late 1980s.

“The policy was that there would be no regulation by the government, and no intervention,” recalls Hiromitsu Takizawa, senior analyst at the Research Institute for Independent Higher Education, a think tank run by the Association of Private Universities of Japan.

Takizawa says the government encouraged overcapacity in the belief that competition would winnow out the weak. “The result is overcompetition. And they have ruled out a rescue scheme or a bailout. A shakeout is inevitable.”

The education ministry declined comment on any of these issues, referring instead to a document compiled in June by one of its many advisory councils.

The report cites the declining population but shies away from a broad solution, suggesting instead that the market is still immature.

Just 2.6 percent of undergraduate and master’s students come from overseas, it adds, compared with the OECD average of 7.3 percent. Most observers agree that Japanese colleges would benefit greatly from more mature and foreign students but say there are too many structural barriers to allow them to make much of an impact. Boosting the mature student enrollment, for example, would require something akin to a revolution in corporate Japan.

St. Thomas is among the first wave of private colleges to feel the impact. Its enrollment of freshmen plummeted from more than 400 a decade ago to 110 this year. The school currently has 542 undergraduate students, roughly half its government-set quota.

The president’s office explains that as the number of high school graduates began to fall, the bigger, more prestigious colleges such as Osaka University began lowering their admissions standards.

“Students who once couldn’t get into those universities suddenly could, so they went there instead,” explains Kariya. “We were left behind.”

Management battled to keep St. Thomas afloat, freezing staff pay, transforming its curriculum, bringing in consultants and starting an entirely new department of human development — even hiring new teaching staff as late as last year.

An ill-fated name change from Eichi University in 2007 failed to halt the decline and led to accusations of mismanagement. Whatever road the university took, however, there was no changing the hard facts, says Kathy Yamane, director of the college’s Center for Cross-Cultural Exchange. “The No. 1 problem is demographics. There just aren’t enough students to go around.”

In response, St. Thomas began recruiting undergraduates heavily from abroad, with President Takehiko Oda leading at least one university delegation to China himself.

Today, 195 foreigners, most of them Chinese, make up a third of the student body, a vast increase from the 10 or so a decade ago.

Kariya admits there have been “some” problems with immigration and says St. Thomas has ruled out the possibility of increasing enrollment of foreign students to stave off bankruptcy.

“We think we have reached the limit of what we can handle,” he says, adding that the education ministry would “have problems” with such a decision. “Its general policy is that Japanese universities should be for Japanese students.”

Such views appear to throw cold water on a pledge two years ago by then Prime Minister Yasuo Fukuda to nearly triple the number of new foreign students to 300,000 by the end of the next decade.

Privately, many higher education specialists call the pledge unworkable, saying Japan is simply not equipped, structurally or psychologically, to deal with such an influx without major government help.

Most cite finding a place to live high on the list of problems that must be solved. Apartments are expensive and real estate companies in rural areas often refuse to rent to non-Japanese.

Private colleges admit off the record that they don’t see China or anywhere else in Asia as the solution to their problems.

“Many small private colleges have an unofficial ceiling on students from Asia of 10 percent,” says an official at troubled Tokyo Fuji University, who also requested anonymity. “Accept more and the reputation of the college declines. It becomes self-defeating because Japanese students start believing the college is poor.”

Weatherby concurs. “The more foreign students you have, the harder it is to get Japanese 18-year-olds to come. That’s just a sad fact.”

With nowhere else to turn, some colleges are pinning their hopes on the Democratic Party of Japan-led government. But while the DPJ has promised “drastic” reform to slash tuition fees — among the highest in the world — it has yet to dive into the enrollment crisis.

“I have seen no concrete changes so far,” says Takizawa, who adds that criticism of the previous government’s approach is growing. “Many accept that excessive competition has developed negative effects.”

Whatever happens, it is likely to come too late to save St. Thomas.

The president’s office hopes the college might be taken over by a larger university, allowing it to continue as a going concern. In the meantime, many professors are looking for work elsewhere.

“It’s a pity because it is a special place,” says Nobumichi Koyanagi, a second-year student. “It’s small and intimate and our relationship with the teachers is friendly.”

Is that why he chose to come here? “No,” he says, laughing sheepishly. “I couldn’t get in anywhere else.”