Student Loan Defaults Increasing At Record Speed in Japan

As the cost of obtaining a college degree has skyrocketed over the years, millions of Japanese are facing potential financial crisis for pursuing post-secondary education.

According to the documents obtained through a freedom of information request to Japan Student Services Organization (JASSO), a government funded organization which is responsible for lending more than 99 percent of all student loans Japanese college students use, 735 individuals who used JASSO student loans filed for bankruptcy in the year of 2015. The number was at 487 in 2013, an increase of a whopping 34 percent in just two years.


The Abenomics, economic policies advocated by Prime Minister Shinzo based upon the “three arrows” of monetary easing, fiscal stimulus and structural reforms, was supposed to revive the Japanese economy and improve living conditions. The situation, however, has been the exact opposite.

Wages remain the same and real wage growth has even been negative in the past several months. It finally increased in May when the government announced a 0.5 increase from the same month of the past year. However, according to the data from the National Tax Agency, more than 11,390,000 people in 2014 are living off an annual salary of less than 2,000,000 Yen, making them the so-called “working poor”. The gap between the rich and the poor has widened. The relative poverty rates stand at 16 percent also in 2014, the worst on record.

Such economic conditions have taken a toll on graduates repaying their student loans. The reasons for increasing student loan defaults are clear: the increase in tuitions and the decrease in decently paying jobs.

It might be difficult for those who graduated college in the 70s and the 80s to understand why the young are having so much difficulty repaying their student loans. This is because the cost of getting a college degree has gone through the roof. The tuition of attending national universities was set at 36,000 Yen per year in 1975. Now, students at national universities pay 535,800 Yen a year, a 1388 percent increase.  Those attending private universities face a much tougher situation. On average, private schools charged about 180,000 Yen per year in 1975 according to the data published by the Ministry of Education, Culture, Sports, Science and Technology. Now private universities ask their students to pay 860,000 Yen.

As college tuitions continue to increase on a yearly basis, more and more students are borrowing money from JASSO, the largest creditor of student loans in Japan. According to JASSO, over 38 percent of students attending four-year colleges borrow money from JASSO to pay for their tuition, books, housing, and other expenses.

Another factor contributing to the increase in the use of student loans is the shrinking support from the students’ parents. College students traditionally received assistance from their parents but the amount they receive is now on average a mere 700 Yen per day. Let’s not forget that Tokyo, where one out of every four students in Japan lives, is one of the most expensive cities in the world. To make up the difference, they need to have a part-time job and borrow money from JASSO with interest of up to 3% per year.

It would not be such a big social issue if those students actually repaid their loans.  They cannot, whether they think it is important to repay student loans or not, repay if they do not have a permanent job or be on unemployment, which is exactly what is happening. More than 40% of those in ages 15-24 are being hired as temporary workers, according to the Ministry of Health, Labor and Welfare. Most temporary workers work full time just like their counterparts but their wages are kept extremely low to the point where they need to work two or even three jobs. And their employment is so unstable that there is always a chance their contracts do not be renewed.

If one cannot repay his loans and becomes three months behind on his monthly payment, JASSO would have his name listed on the so-called blacklist and the information will stay on the list until five years after the last monthly payment is made. If he becomes nine months behind, JASSO will exercise its right by taking the matter to court. In 2015 alone, the JASSO annual report shows that more than 20,000 were blacklisted and 8,700 were sued by JASSO, compared to 4,500 and 7,400 respectively in 2010.

And it is not just the young who face tough conditions. JASSO requires a student to come up with not only one but two sureties to borrow money from them, meaning that a parent and most of the time an uncle or a grandfather would be bonded into this debt. If it becomes impossible for a student to repay his loan, the creditor would simply ask his sureties to compensate for it, with a five percent per year delinquent charge on top of the original amount. JASSO does not hesitate to sue co-signers as well. The only way for a borrower or a cosigner to get away with this debt is to declare bankruptcy, which is exactly what is happening.

Students in only a handful of developed countries experience such hardships. Among the thirty-five members of the OECD, many do not even charge tuition from students. Out of countries that actually charge tuition, Japan is one of only three that have no scholarships or grants. The other two are Chile and South Korea. It is interesting that in Japan student loans are literally called “scholarships” even though they are loans and not grants. In fact, the Japanese government has not offered any type of grants or scholarships in the past.

In order to tackle this social issue, the Abe administration finally announced last year that it would implement a grant-type scholarship given to college students starting in April of 2017. This is the first time in Japanese history that a scholarship is implemented whether need-based or merit-based. However, even though more than 500,000 enter college every year, only 20,000 students or about 3 percent will benefit from this, and those receiving public assistance or living in orphanages are the only ones eligible to receive this scholarship. Also the maximum amount given to a student per year is set at 480,000 Yen, which is not even enough to cover a year’s worth of tuition.

Experts claim that although implementing this new scholarship was a step in the right direction, the contents pale in comparison to those of other OECD countries. Since the amount and the beneficiaries are extremely limited, it would not be enough to put a brake on the increasing number of student loan bankruptcies. Haruki Konno, a researcher and the representative of a nonprofit organization POSSE which obtained the bankruptcy data from JASSO, claims that the government needs to act quickly. “JASSO has systematically sued those who cannot repay, no matter the circumstances. I have seen people on public assistance and mothers living in women’s shelters getting sued because they could not pay their dues or they put their names on the paper so that their sons or nephews could have money to go to college. As the working conditions worsen and salaries decrease, colleges need to stop charging tuitions as some colleges in several European countries do to avoid such tragedies.”




5 Responses to “Student Loan Defaults Increasing At Record Speed in Japan”
  1. Nihon Scope says:

    Well not too different from the States huh? Student loans certainly have gotten crazy!

  2. Ned Lowe says:

    If you are able to pay back the balance of your student loan in full by 3.31 the year you graduate, JASSO will forgive the accumulated interest – you repay ony the amount borrowed. 535,800 per academic year is also phenomenally cheap tuition, even if it has increased dramatically since 1975. Many people in management at first tier companies w/ college age kids earn that much a month. While the children of the “working poor” and working class have never attended university in Japan in large numbers, tuition is still within reach – unlike in the US, where even a middling state university ecucation can cost $25,000 for tuition alone – $100,000 over 4 years, w/ no relief, and no ability to discharge the loans via bankruptcy. And why, if the article is supposed to reflect the current situation, are the most recent figures cited from 2014?

    • subcultureist subcultureist says:

      The Japanese government puts together the figures and they are often years behind the current state.

  3. S. Urista says:

    This article may be trying to make some valid points, but the overall impact is severely lessened due to the over-exaggerated claims, lack of context, and some appalling oversights (deliberate or otherwise). Manipulating data by failing to put numbers in context is not journalism.

    “735 individuals who used JASSO student loans filed for bankruptcy in the year of 2015. The number was at 487 in 2013, an increase of a whopping 34 percent in just two years”.

    Is a 34% increase in two years a lot? It seems like it, but if you start out with a small number, any increase can look ‘whopping’. There are around 2.8 million students in Japan in any given year, so 487 individuals would be just 0.02% of the current student population. And 487 or even 735 individuals would be a tiny, tiny fraction of the entire population of individuals that have ever taken out a student loan from JASSO, which ‘handles 99% of student loans in Japan’. And of course we can’t confuse correlation with causation – was the increase ‘34% increase’ in bankruptcies *because* of the student loans, or some other factor? What is the proportion of people that had JASSO student loans filing for bankruptcy relative to the population at large? My starting hypothesis would be that having a student loan meant that the borrower was a student, and – ceteris paribus – one would normally assume that more education means higher salary and a *lower* likelihood of bankruptcy. That’s not addressed at all in the article.

    “The tuition of attending national universities was set at 36,000 Yen per year in 1975. Now, students at national universities pay 535,800 Yen a year, a 1388 percent increase”

    This is called ‘having fun with arbitrary starting points”. Yes, that math is correct – but set the starting year at 1976 – when the tuition almost tripled! – and you get only 458%, and remember, this is over 40+ years. Start in 1978 (tuition now up to 144,000 yen, versus 36,000 yen just three years prior) and it’s only 272% over 38 years or so. You know what’s risen in price by around 300% over the last 38 years? Practically everything.

    What’s incredible, however, is that, yes, as the article notes, national university tuition was indeed set at 535,800 yen….back in 2005, and it hasn’t been raised since! Over 10 years without an increase in price. I don’t know if the author was simply lazy, or deliberately left it out because it didn’t fit the ‘college degree costs going through the roof’ narrative. And it’s not just national universities – private university costs have not gone up all that much either – based on the same data that I assume the author used for the article, the average cost of tuition at a private university has only risen from around 820,000 to 860,000, an increase of less than 5% over 10 years.

    The only reason the ‘cost of going to university has gone through the roof’ is because the author is comparing current prices to prices 40 years ago, which obviously has absolutely nothing to do with any (alleged) increase in student loan defaults today.

    It should also be noted that the cost of going to a public university in Japan is still far cheaper than the US (and that’s ignoring the astronomical costs of private universities in the US), or the UK.

  4. S. Urista says:


    Further, how reasonable is it to look at individual bankruptcies as a proxy for ‘student loan defaults’? It’s not clear from the article – what was the average age of the person filing for bankruptcy? Someone filing for bankruptcy at age 25 is probably in a different situation from someone filing at age 45. Surely there are other data points that would give us a better picture on whether there really is a ‘student loan default crisis’.

    For example: According to the link in the article, the number of JASSO loans newly falling three months or more in arrears in 2015 actually *declined* from the previous year. The total amount of collections in 2015 as a proportion of the total amount to be collected during the year also improved versus 2014. In other words, it would appear that people are more likely to be paying back their student loans, not less likely.

    “one cannot repay his loans and becomes three months behind on his monthly payment, JASSO would have his name listed on the so-called blacklist and the information will stay on the list until five years after the last monthly payment is mad”

    Why is the author using the word ‘blacklisted’? If this were, oh I don’t know – any other country in the world – the text would say, “if the borrower hasn’t made a payment in three months, it’s reported to the credit bureaus”. And yes, that information will stay on your credit report for some years – as it should; that’s what happens when you ignore your bills. The article makes it sound like JASSO is some loan shark out busting the kneecaps of uncles and dads of students that didn’t pay their debts, yet fails to note that JASSO has programs for borrowers to negotiate repayment plans (額返還制度, 返還期限猶予制度 etc).

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