Committee for the Abolition of Illegitimate Debt

In Japan, the student loan issue is so serious that at last the government now started a programme of scholarships and grants since this April. Despite its limits, the implementation of this programme was only made possible thanks to the pressure of social movements, making voices heard for improving the student loan system. This year, about 25,000 students can get these scholarships and grants. Of course, the problems are not solved at all.

In this presentation, I will try to explain the situations of student debt issue in Japan.

Tsutomu Teramoto (Attac Japan)

But before this, in order to easily understand the issue of student debt, I’d like to sum up the economic situation of Japan.

“Abenomics” is the name of the economic policies advocated by Prime Minister Shinzō Abe since 2013. These economy policies have been based upon "three arrows”:

1. monetary easing,
2. fiscal stimulus,
3. structural reforms.

The Government debt Government debt The total outstanding debt of the State, local authorities, publicly owned companies and organs of social security. is equivalent to 253% of GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. . The Japan Bank, the central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx of Japan, owns 43.2% of the Government debt, while around 40% is owned by private banks in Japan. The government borrows and repays every year: in the 2018 National Budget, 34.5% of revenue is public debt, and 23.8% of expenditure is repayment of public debt.

In the 2018 National Budget, 34.5% of revenue is public debt, and 23.8% of expenditure is repayment of public debt

Current economic situation is the result of “Abenomics”. The internal reserves of nonfinancial companies reach 406.23 trillion JPY (March 2017), or around 4 trillion dollars. But workers’ real wages have been decreasing since 1997. Companies never distribute their benefits to workers. The unemployment rate dropped to 2.4% (January 2018), the lowest rate since March 1993. The unemployment rate has decreased for several years. Furthermore, there is a shortage of labor force in some sectors, especially the construction sector, the food service sector, the transport sector. This shortage is compensated in part by the migrant labor force: 1.2 million foreign workers are currently in Japan. Non-regular employment rate has been increasing for decades, especially for women and young people. On the other hand, disparity between the rich and poor is widening. Poverty issues, especially concerning women, elder people, and children, have been getting more and more serious. Japan is ranked 34^th out of 41 developed nations in the UNICEF child poverty index.

An article from the Japan Times, “Japan’s students face uncertain future under a cloud of debt” (2016/12/29), is rather revealing on the student debt situation. Here are some excerpts.

“Kengo Kyogoku borrows about ¥122,000 ($1,035) per month in addition to a scholarship and a part-time job, because his mother can’t afford to pay his college fees at the prestigious Waseda University in Tokyo.

Kyogoku’s case is becoming the norm rather than the exception in Japan, where more than half of college students now need financial aid. Loans were rare in the past as most students came from affluent middle-class families who could afford the fees. Today’s parents inherited the legacy of Japan’s long economic ice-age, with fewer family-wage jobs and lower savings, fueling a sense of generational inequality.”

This is one of a lot of examples of students and young people who borrow student loans and now are worried about their future life.

There is a lot of examples of students and young people who borrow student loans and now are worried about their future life

In Japan, there are very few real scholarships/grants. But JASSO’s student loan is named “scholarship” nonetheless. This leads many borrowing students to being confused and not understanding what student loans really are.

JASSO (Japan Student Services Organization) started student loans with interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. and
also started “Hope 21 Plan” (this plan made it possible for almost all the students to borrow student loans).

JASSO’s student loans are totally 9,179.3 billion JPY (around 90 billion US dollars)、 6% of US student debt. And these loans are of two types: interest-free student loans (limited by household income and grade) and student loans with interest (annual interest rate is 0.33% in 2017, but 1.52% in 2010). Average total loan amount per individual reaches 2,370,000 JPY (around 22,000 dollars) in interest-free student loans and 3,430,000 JPY (around 32,000 dollars) in student loans with interest. In recent times, there has been a decrease in the number of students who borrow student loans with interest. This is only because the seriousness of the student loan issue has been made well known thanks to the movements which are tackling it.

Funds for student loans come from the government through the fiscal investment and loan program, from the JASSO bonds (120 billion JPY in 2016), from private banks (300 billion JPY in 2016) and from repayment from borrowers.

Why are student loans rapidly growing? There are three main reasons:

1. The share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of public expenditure in education is much lower in Japan than in other countries.
2. Tuition fees have been increasing for decades. In 2014, the average annual tuition fees of private universities were 864,384 JPY (around 8,000 dollars). When they enter private universities, in addition to this, they must pay entrance fees and other fees, totaling 1,311,644 JPY (around 12,250 dollars). And 80% of university students attend private universities.
3. Household income and workers’ wages have been dramatically decreasing since the 1990s.

Can young people repay their student loans? Graduates cannot always get regular jobs enough to repay loans. Nevertheless, the repayment of student loans starts just 7 months after graduating. The default rate of student loans is very low, 1.9% in 2017 partly because of hard penalties against delinquent loan payments such as high delinquent fees (the annual rate is 5%, but was 10% before 2014), harsh loan collection measures (collected by servicers, registered into consumer data agencies and taking legal actions such as the seizure of bank deposits and attachments of earnings).

System change is needed

How could the student debts issue be settled? We must fight for the following demands:

1. To increase educational expenditure dramatically including free education in public universities.
2. Real scholarship/grants for every student who needs financial help.
3. Reduction and exemption of repayment to borrowers who cannot repay student debts.

But under the neoliberal system, these demands cannot be implemented. System change is needed.