Paying off student loans is one of the most serious financial problems weighing down university graduates. The Abe administration has included introduction of a government-sponsored scholarship program in its plan to offer all citizens chances to play an active role in society. It must do its utmost so the program will be introduced soon.
A family’s financial condition should not discourage motivated youths from trying to receive higher education. Expanding financial support is indispensable in enabling students from low-income families to concentrate on their studies.
The economic and social policy outline adopted by the Abe Cabinet earlier this month calls for starting discussions on introducing a scholarship program. The education ministry will set up an experts’ panel to work out the details. The ministry is expected to decide on the amount of funding and the number of students to be covered by the time the fiscal 2017 draft budget is compiled in December.
The number of people who rely on student loans has been on the rise. These days, 1 out of every 2 university students takes out such loans to pay tuition and other necessary expenses. Rising tuition fees — ¥540,000 annually for national universities and an average ¥860,000 for private universities, according to media reports — and a decline in family income due to sluggish economic growth are forcing many students to rely on such loans.
Japan Student Services Organization (JASSO), an education ministry affiliate, is the nation’s biggest student-loan institution, with 1 out of every 2.6 university students borrowing from it. It has ¥1.112 trillion in outstanding loans this current fiscal year. JASSO’s loans are extended to undergraduate and graduate students at universities. While it offers both interest-free loans and those carrying interest, the latter account for nearly 70 percent of the total.
Many graduates face difficulties paying off their loans, mainly due to a decline in the number of decent full-time job opportunities, with many young people getting stuck in irregular, low-paying jobs, as well as income not growing enough even if graduates land permanent jobs.
In fiscal 2013, some 334,000 borrowers were in arrears with repayment to JASSO, roughly 1.7 times more than in fiscal 2002, when the corresponding figure was about 200,000. If borrowers fail to meet the deadline for full repayment, JASSO imposes a penalty in the form of additional interest rates. If they delay repayment for more than three months, their names are registered with personal credit information institutions, which will result in limits on the use of their credit cards. If repayment is delayed by more than nine months, JASSO files a lawsuit.
Some borrowers are being forced to file for voluntary bankruptcy. But if a court declares the person bankrupt, the loan guarantor must repay the debt. As of the end of fiscal 2014, there were 11,482 such bankruptcies, according to JASSO. A study shows that difficulties in repaying student loans are negatively impacting borrowers on whether to marry or have children. It would be no surprise if high school students choose not to go on to universities given the prospect of having to rely on student loans to cover the tuition and the difficulties they will likely face in repaying them.
In an attempt to reduce the burden on student loan borrowers, JASSO will introduce a system in fiscal 2017 to ease monthly repayments. Initially it will be applied solely to interest-free loans. Monthly repayments will be fixed at 9 percent of the borrowers’ taxable income — so that the repayment period will be determined by their pay in the jobs they take after graduation. However, such tinkering with the student loan system will not provide a fundamental solution to the financial problems confronting many students.
The lower a family’s income is, the less the chance that children from that family will continue on to higher education. Student loans do not rectify this situation as they impose a burden that low-income students cannot afford.
The principle of equal opportunity in education should not be undermined by disparities in family income levels. Children from low-income families should be given the same opportunity for university education as those from higher income families. To prevent a chain of poverty across generations, the government must strive to ensure equal educational opportunities for young people of all incomes, for example by awarding scholarships that don’t require repayment to those who qualify financially.
The ruling and opposition parties are calling for institutionalizing government-sponsored scholarships in their campaign for next month’s Upper House election — the first Diet race since the Public Offices Election Law was revised last year to lower the voting age from 20 to 18. Their call for the introduction of a scholarship program must not end up as just a publicity stunt in pursuit of votes from young voters. They must follow up on their promises to introduce the system.
The biggest obstacle to introducing government-backed scholarships will be coming up with the funding. The issue should be considered in the overall context of Japan’s low public spending on education. Education at a Glance 2015, a report released by the Organization for Economic Cooperation and Development, shows that public spending on education in Japan was a mere 3.5 percent of its gross domestic product in 2012 — the lowest among 32 of the 34 OECD members where comparable data were available and against an OECD average of 4.7 percent.
The government should significantly increase spending on education so motivated students can have access to higher education free of the financial constraints of their families. Publicly funded scholarship programs should be considered a long-term investment in human resources for the nation’s future.
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