Everyone knows that a university education leads to a higher salary, but how much higher?

According to labor ministry statistics, there isn’t much difference between salaries of people in their 20s who graduated from university and persons in their 20s who graduated only from high school. But once they get older, into that part of their lives where they may start raising families, gaps start to emerge. According to a Nikkei newspaper estimate based on labor ministry statistics, for male college graduates between the ages of 45 and 49, the average annual salary in 2016 was about ¥9 million, whereas for high school graduates of the same gender and age demographic, it was ¥6.6 million. Between the ages of 50 and 54, the gap remained roughly the same: ¥9.7 million for university graduates, ¥7.2 million for those who only completed secondary school.

In terms of a lifetime of toil, the labor ministry reported in 2013 that the average male university graduate earned ¥286 million, or about 20 percent more than the average high school or vocational school graduate, which was ¥240 million. Women’s salaries were less in both categories, but the 20 percent difference still applied.

So it does pay to go to university, but, then again, university is not free. In fact, it is becoming increasingly expensive, so much so that many qualified young people can’t afford it. According to the Nippon Foundation, a nonprofit research group, the cost of an education at one of Japan’s “prestigious” private universities can cost as much as ¥100 million, which is more than one-third of what the average university graduate makes during his lifetime.

According to the education ministry, 76 percent of Japan’s high school graduates go on to university, junior college, vocational school or other institution of higher education. In 2015, the ministry reports, 11 percent of children who grow up in public welfare facilities, such as orphanages, went on to university, while 20 percent of children from families receiving public assistance did so, as did 24 percent of children from single-parent households. Obviously, persons from lower-income families are less likely to be able to receive higher education due to the cost, and that means these people will make less money over the course of their lifetimes. The Nippon Foundation estimates that the Japanese economy loses out on more than ¥40 trillion in terms of productivity and consumer spending by not making it possible for qualified and ambitious young people from low-income families to attend university.

In Japan, there are few recourses for low-income persons who want to go to college.

One is the tuition exemption system, which pays for low-income students’ tuition while they go to school. But tuition only counts for a portion of school expenses. Students still have to pay for books and supplies, as well as transportation costs and, if they don’t live at home, rent. The only other recourse is shogakukin, which is usually translated as “scholarships,” though in reality they are student loans.

According to Haruki Konno, who runs the nonprofit educational assistance group Posse, in his new book “Black Shogakukin,” about 39 percent of current university students have taken out loans. If the loan is interest-free, the student receives an average of about ¥53,000 a month. If it’s a loan with interest, the amount is around ¥74,000 a month. In 2015 the total amount owed for four years of college without interest was over ¥2.3 million and with interest ¥3.4 million, which doesn’t sound crippling, but graduates are expected to start paying off the loan as soon as they get a job, which, invariably, is low paying in the beginning, so it’s easy for new grads to fall behind in payments, and that leads to penalties that just keep getting higher as more payments are missed, compounding the problem.

Konno reports that in 1998, 500,000 student loans were approved, a number that doubled by 2006 and which peaked in 2013 at 1.44 million. In other words, the number of student loans has tripled over the last 15 years. More significantly, the number of scofflaws sued by the government-run Japan Student Support Organization, which arranges the loans, increased almost fivefold, from 1,881 cases in 2006 to 8,713 in 2015. About 600 people file for bankruptcy every year due to unpaid student debt.

The Organization for Economic Cooperation and Development lists three countries that have both “high tuitions” and “loan-only scholarship systems”: Chile, South Korea and Japan. Starting in fiscal 2018, however, the government will do something about it, by launching a grant-type scholarship system for deserving higher education hopefuls.

In the beginning, 20,000 students from low-income households will receive between ¥20,000 and ¥40,000 a month. Currently, about 2,650 students are receiving these grants on a trial basis, mainly people who grew up in orphanages. Next year, the pool of recipients will expand to include those coming from homes that do not make enough money to pay local taxes. Applications for the grants in 2018 started in spring this year for students hoping to enter universities next spring, with recommendations from schools they are currently enrolled in. This is one aspect of the program that differs from most scholarship systems in other countries, where a student usually has to be accepted at an institution of higher learning before a scholarship is considered.

The payment system is simple.

Students who live at home and attend public or national schools will receive ¥20,000 a month, and if they rent it’s an extra ¥10,000. Those who attend private schools receive ¥30,000 a month if they live at home and ¥40,000 if they rent. This year, the cost of the first year of attending a national university starts at ¥817,800 (¥535,800 tuition plus ¥282,000 enrollment fee), while the average for a private university in 2014 was ¥1.13 million (¥864,384 tuition plus ¥261,089 enrollment fee). If the public school student gets ¥30,000, that’s 44 percent of the fees. It’s 43 percent for the private school student if they get ¥40,000 a month. In the end, these students will likely still have to take out loans. But only 20,000 applicants will receive grants, which represents only 3.4 percent of all the students who started university in 2015 — 2.6 percent if you count vocational school students, which the government does for purposes of grant consideration.

Ostensibly, the criteria for approving grants are grades and “character,” but as Konno points out, each school is only allowed to make one recommendation, which means politics will likely come into the equation. And students must apply through their high schools. They cannot do so on their own.

The lucky students who receive the grants must also keep their grades up. If they fall behind in their studies, the government can demand they pay back any grant funds they received in the past. They even have a repayment system already set up for such people that is similar to the student loan repayment system. Konno says that because all of the grant recipients are from poor families, they will likely have to work while attending school, thus making it more difficult for them to keep up with their studies.

So even if they receive the grant, they could end up in a worse financial hole than they would if they had only taken out a loan.

Yen for Living, a column that covers issues related to making, spending and saving money in Japan, runs on the second Saturday of every month.

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