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The Japan Students Services Organization (JASSO), a student loan provider under the wing of the education ministry, is suffering from a high delinquency rate on loan payments. Starting in fiscal 2010, it will tell all new borrowers that it will report long-term delinquent borrowers to an organization that logs consumer credit histories. This will help prevent borrowers from taking on multiple debts.

But JASSO’s real hope is that the threat of being reported, which would result in difficulty in receiving loans or getting credit cards from other institutions, will increase borrowers’ incentive to repay scholarships without fail.

At present, one of every three university students has received low-interest loans from JASSO, established in 2004 as an independent administrative body after it took over the Japan Scholarship Association (which dates back to 1943), and four other organizations. Including the days of the scholarship association, about 8.14 million students have received loans. Since repaid loans become funds for future loans, repayments are the key to continuation of the student loan system. It is imperative that borrowers repay without fail.

In fiscal 1999, JASSO relaxed conditions for loans, leading to an increase in the number of students who obtained loans from it. In fiscal 2008, borrowers are expected to number 1.22 million, about 2.4 times the figure in fiscal 1998. JASSO was to get back ¥317.5 billion in fiscal 2007 but failed to recover ¥66 billion of the amount. JASSO also had ¥225.3 billion in loans that had been in arrears for three months or longer. For fiscal 2008, the government has poured ¥130.9 billion from the general account budget to support JASSO’s loan scheme.

JASSO plans to make public the names of universities with high delinquency rates among graduates. Universities need to remind students of the duty to repay. Economic conditions are also behind the overdue payments. As 45.1 percent of borrowers cited low income and 23.5 percent joblessness as reasons for their failure to repay in a 2006 survey, the government should pursue policies to improve the employment situation.

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