Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications Student loans in Japan: Current problems and possible solutions

Student loans in Japan: Current problems and possible solutions

Shiro Armstrong, Lorraine Dearden, Masayuki Kobayashi and Nobuku Nagase
Journal article | Economics of Education Review

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 the government have grown rapidly to sustain the gradual increase in university enrolments. These time-based repayment loans (TBRLs) have created financial hardship for increasing numbers of loan recipients and their families. 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 including grants and a partial income-contingent loan (ICL) scheme to help alleviate these problems.

While the ICL scheme is a positive development, this paper shows that it requires further refinement and broader coverage if it is to adequately address the challenges facing higher education financing in Japan. We show that an affordable and universal ICL system could be introduced in Japan that avoids problems with the current partial income-contingent loan scheme and would help alleviate access issues for those from disadvantaged backgrounds. Importantly, the unique features of the Japanese labor market have to be carefully considered, especially the large gender wage gap for married women. By introducing dynamics into modeling graduate earnings and using carefully selected parameters, we show that it is possible to have a universal ICL which achieves a balance between access and affordable repayment with minimal long-run costs to taxpayers.

More on this topic

Newspaper article
'The power of the Treasury needs constant challenge and scrutiny, but in the end, it needs to play its role in challenging and scrutinising the rest of government. It needs to be unpopular.' Paul Johnson in The Times on the Treasury's role in last week's decisions on education spending.
Observation
In this observation we look at the arguments to consider when assessing the merits of the large injection of education spending.
Observation
Recent IFS work shows that students from disadvantaged backgrounds see some of the largest financial benefits from going on to university. But these students are also less likely to attend university than their better-off peers who get exactly the same grades as them. And, even among students with ...
Press release
The government has committed to spend about £4.3 billion on education in England in response to the pandemic over the two years 2020–21 and 2021–22. However, about £1.3 billion or 30% of this supposedly additional money is currently due to be funded from underspending or from existing ...