Financing higher education in Japan and the need for reform

Abstract

The Japanese higher education sector has seen increases in tuition with stagnant household incomes in a society where family support for university students has been the norm. Student loans from government have grown rapidly to sustain the gradual increase in university enrolments. These time-based loans have created financial hardship for increasing numbers of loan recipients and their families through high interest rates for late repayments. There is some evidence that prospective students from low-income households are forgoing a university education to avoid student loan debt. The Japanese government has introduced some measures attempting to overcome these problems. These measures include grants for students and an income-contingent loan scheme that is available to 12 per cent of loan applicants. The income-contingent loan scheme, introduced in 2017, is a positive development, but it requires further reform and broader coverage if it is to adequately address the challenges facing higher education financing in Japan and alleviate repayment and default problems for loan recipients.