Warnings rise over student loans

A government-affiliated organization is stepping up efforts to crack down on the rising number of graduates who are not paying off their student loans.

This fiscal year alone, the Japan Student Services Organization (JASSO) sent 10,473 notices to borrowers warning of legal action if they do not begin repaying their debts. The figure was 2.5 times higher than the number sent out in fiscal 2005 and more than 20 times that of fiscal 2004.

Delinquent borrowers are on the increase in part because more graduates are either unemployed or able to find only low-paying, part-time jobs.

JASSO's renewed efforts also reflect the change in its status in 2004 from a special corporation to an independent administrative agency. It now is required to balance its own books and work toward profitability.

The organization took over the work of the Japan Scholarship Foundation and several other organizations in 2004. It offers both interest-free and interest-bearing loans to students enrolled at universities, junior colleges, vocational schools and other educational institutions.

In fiscal 2005, JASSO extended about 400,000 interest-free student loans and about 580,000 interest-bearing student loans.

Those figures mean that one out of every 3.9 undergraduates at universities and junior colleges and one out of every 2.5 students in university graduate courses took out loans from the organization in fiscal 2005.

That year, 257.5 billion yen in total was due to be repaid. But as much as 56.2 billion yen, or about 20 percent, was not.

Each year, the number of people who are at least three months late in making loan payments increases. The number had risen to about 185,000 at the end of fiscal 2005.

JASSO investigated about 1,800 borrowers who had not made payments for one to two years. A little more than 20 percent, up sharply from 6.5 percent in fiscal 2001, told the organization they were unable to make payments because they were unemployed.

If the loans are unrecoverable, the organization will be unable to extend loans to new borrowers.
The number of students seeking education loans is increasing, in part because tuition fees are also climbing.

This fiscal year, JASSO is expecting to apply funds repaid on outstanding interest-free loans for about 70 percent of its planned new loans.

Delinquent borrowers could face lawsuits that could lead to property seizure, the organization has warned.

JASSO is targeting mainly nonpayers who have missed at least one year's worth of payments and who apparently have the wherewithal to repay their debts.

Many borrowers have repaid their loans after receiving the warning notices. In fiscal 2005, court-ordered property seizures occurred in only four cases.

"When taking legal steps, you should distinguish between those who cannot repay and those who do not repay even though they can," Masayuki Kobayashi, an associate professor of education at the University of Tokyo, said.

"Nonpayers with high incomes should be strictly dealt with. But on the other hand, you should take a different approach for those who are unemployed," he said.

http://www.asahi.com/english/Herald-asahi/TKY200701090135.html