Technical Report Getting student loans right in Japan: problems and possible solutions

Dearden, Lorraine  ,  Nagase, Nobuko

2017-12 , Institute of Economic Research, Hitotsubashi University
In this paper we take a detailed look at the Japanese university graduate labor market to understand more fully the problems with the current Japanese student loan system identified in Kobayashi and Armstrong (2017). We see that unlike most other countries with a large proportion of female university graduates, Japanese female graduates earn significantly less than male university graduates and this appears to be driven by significant wage falls when female graduates marry or have their first child. This means that understanding the repayment burden problems of the current student loan system and designing alternative income contingent loan systems needs to take into account the household income of graduates. We show that an affordable income contingent loan (ICL) system could be introduced in Japan, however the repayments would probably have to be based on household income. We illustrate this with a couple of example ICLs and highlight further work that needs to be done to come up with a feasible and fair student loan system in Japan for post high school education.

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