Japan like most countries around the world has high expectations on new professionals. One aspect is university education and in many cases having graduated from a well-known university is a must. Now according to the Yomiuri Shimbun this has become more challenging for lower-income households. Due to the long ongoing economic slump in Japan it has become harder for parents to have the necessary funding, plus the increased competition for part-time work makes the situation more challenging for the students as well.
An unexpected side-effect of this year’s changes in the banking regulations meant to deter aggressive sales practices, caused some banks, for example Resona Bank, to stopped accepting applications for low-interest education loans designed for university and vocational school students. It seems that three banks operated by Resona Holdings, Inc. (Saitama Resona Bank and Kinki Osaka Bank) and some regional banks have terminated the low-interest loans, which were set up to help pay admission, tuition and other fees. These kind of educational loans are extended to students’ parents in cooperation with the educational institutions, which sometimes act as guarantor or contribute to interest payments.
Based on the revised law, banks that offer loans in cooperation with educational institutions must register with the METI (Economy, Trade and Industry Ministry), and are subject to on-site inspections. Further these banks need to report periodically the balances of their customers’ loans to credit information companies. Due to this new obligations banks potentially run into new costs of about several hundred million JPY. As a consequence many banks have chosen to stop extending these cooperation loans to avoid the additional work and financial burden. According to Yomiuri Shimbun the banks had offered loans in cooperation with about 80 universities, with an interest on the loans of about 3.5 percent (one to 1.5 percentage point lower than standard educational loans). For example Resona had extended such loans to several hundred students annually, when they have currently about 5,000 outstanding cooperation education loans.
Resona has offered an alternative by lowering the interest rate of its standard educational loans to the cooperation loans’ level, but would limit the application period to around the start of the academic year. Most regional banks have also stopped offering educational loans in cooperation with educational institutions.
For example Bank of Kyoto ended its program in December, but they shifted now to two different direct educational loans, which have slightly higher interest rates.
Of course higher education is not the only way to get access into the professional world, but for sure it helps. Presently about half of the university graduates cannot find a full-time job, but the situation seems to look better for high school students, but only if their interest lies in craftsmanship. Otherwise, the common taken road is freeter, which allows more free time, but is highly challenging financially.
Brought to you by Sibylle Ito (シビル伊藤)