The Repayment Problem: Understanding Japan’s Education Grant System

In Japan, government-funded “scholarship” programs are managed by an organization called the Japan Student Services Organization (JASSO). In 2023, out of a budget of 1,200 billion yen (7.6 billion euros), the stock markets represent 260.1 billion yen (1.65 billion euros, 22.6% of the total budget), when loans with or without interest and requiring repayment weigh 890.7 billion yen (5.65 billion euros, approximately 80%).

SMBC Consumer Finance carried out a survey to understand how young people deal with money matters. Respondents were asked whether they were responsible for reimbursing their school fees themselves, whether they benefited from a scholarship and, if so, how they thought they would be reimbursed. In the end, 69.1% of students (including repeaters and young people in vocational training) and 61.7% of high school students responded that they cover school costs themselves. Many young people therefore do not depend financially on their parents.

As the scholarship system has only existed since 2017, it is very likely that the idea that financial aid must necessarily be repaid is still strongly anchored in people’s minds.

However, it is not easy for students to repay their loans on their own. According to JASSO data, a “scholarship” student whose loan ends in March 2022 would have to repay on average a total of 2.2 million yen, without interest (14,000 euros), or 3.4 million yen , with interest (22,000 euros). In 2021, 128,000 young people were struggling to repay their loans and were already three months or more in arrears. Although this figure is decreasing, the problem is far from negligible.

A non-reimbursement grant system was launched in 2017 to support young people from low-income, tax-exempt households. But from 2024, this assistance will be extended to large families with three or more children and with average incomes. Until now, only households with an annual income below 3.8 million yen (24,000 euros) were eligible. This ceiling will be raised and large families with less than 6 million yen in annual income (38,000 euros) will now be able to benefit. There are expected to be an additional 200,000 scholarship recipients.

(Title photo: Pixta)