The government is working to lighten the burden of student loan repayments in an effort to help those who have difficulty finding work after college.
This month, an education ministry advisory panel adopted an outline of a new wage-adjusted government loans program, which is expected to be launched in April 2017. The program is expected to fix monthly repayments in proportion to the individual’s income, pinning repayments at roughly 9 percent of the annual wage.
For those unemployed and with no income, the new system will still require a minimum monthly repayment of ¥2,000 to ¥3,000, but borrowers can defer starting their repayments for up to 10 years. This term limit is a new restriction, as the current program allows those with annual incomes of under ¥3 million to postpone repayment for an unlimited period of time.
Education minister Hiroshi Hase initially proposed earlier this month a new program of loans without repayment requirements, but the government overturned it after Prime Minister Shinzo Abe said at an Upper House session that college loans are not the only way to support younger generations.
“It’s said that about half of the university students use the loans program, and many, including the members of my union, worry about paying it off,” said 22 year-old Kansai University student Makoto Kitamura, who co-represents Kansai Student’s Union. The union is known for organizing rallies in protest at students having to work part-time to make ends meet.
“Our protests involve loan problems, because we think it’s wrong to make strict demands for repayment,” he said.
Many experts also criticize the new wage-adjusted repayment system, saying it is focused more on recovering loans than on providing better service to users.
“The new system not only maintains the downside of the old system, it is worse. It would require those with zero income to make monthly repayments,” said Yoshiharu Iwashige, a lawyer versed in debt relief.
Iwashige is a founder of Shogakukin Mondai Taisaku Zenkoku Kaigi (National Conference of Scholarship Disputes), a group established in 2013 to provide support and advice to students and former students struggling to pay off their loans.
He pointed out that the new system does not include measures to alleviate penalties for those who failed to repay the debt, including interest added to overdue payments.
The government-owned Japan Student Services Organization, which took over the national loans program of Nihon Ikueikai in 2004, is known for taking a harsh line on those who miss repayments.
According to JASSO, the organization filed 6,193 lawsuits in 2012 against borrowers who failed to meet their monthly commitments, compared with 58 lawsuits filed in 2004.
In addition, the organization reports those who are over three months late to the credit bureau of the Japanese Bankers Association, which makes it difficult for them in future to apply for mortgages and other loan programs. The blacklist retains the individuals’ names for five years even after repayments resume.
“Recently I consulted a married couple. The wife has a mental illness and she asked JASSO to allow her to postpone her loan repayments, but she was rejected. Although her doctor said she is not in a condition to work, JASSO told her to get a job that she could do over the phone since she is able to take phone calls,” Iwashige said.
Universities are meanwhile launching new programs of grants as the government has revised the tax exemption system to encourage individuals to make donations to national universities from April this year.
Yamaguchi University President Masaaki Oka announced this month that the school will launch a new program funded by donations from alumnus Mamoru Nanamura, the founder of Tokyo-based Septeni Holdings, to support students in difficult financial circumstances. The program will begin in April.
Local governments, too, are launching similar programs. The city of Nagashima in Kagoshima Prefecture will launch a program in April called Buri (Yellowtail) Scholarship funded by sales of the fish, a local specialty.
It offers the full amount of university fees to students from Nagashima on condition that they remain in the city after graduation.