CRDHE Working Paper Vol.2
Worldwide Perspectives of Financial Assistance Policies:
Searching Relevance to Future Policy Reform for Japanese Higher Education
Edited by Masayuki Kobayashi
Published and Edited byCenter for Research and Development of Higher Education, The Univerity of Tokyo
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June 2008

CRDHE Working Paper Vol.2
June 2008

CONTENTS
Introduction
1
Report 1
Purposes and Analytical Framework of Student Financial Assistance3
Masayuki Kobayashi

Report 2
Higher Educational Cost Sharing and Student Financial Assistance in Japan:
Policy Options in International Context

11
D. Bruce Johnstone

Report 3
Student Financial Aid Policy in Japan

31
Masayuki Shibata

Report 4
Equality and Cost Sharing in Japanese Higher Education

49
Masayuki Kobayashi

Report 5
The Australian Experience of an Income Contingent Loans Scheme

65
Craig McInnis

Report 6
The Changing Nature of Student Funding Policies in Britain

83
Claire Callender

Report 7
Student ﬁnancial aid in Finland

95
Timo Aarrevaara

Report 8
A Study on Expansion and Equality in Chinese Higher Education

105
Ding, Xiaohao

Report 9
International Experience in Affordability, Accessibility and Student Assistance:

117

Lessons for Japan
Alex Usher
About the Authors

135

List of the Participants of the International Conference

139Foreword
This report is one of the outcomes of the “ Task Force of International Comparative Studies on
Student Financial Aid Policies, ” chaired by Prof. Masayuki Kobayashi of the University of Tokyo. The
task force was launched in January 2005, with 44 scholars and government ofﬁcials as members, withsupport from a major grant by the Ministry of Education, Culture, Sports, Science, and Technology,
Japan. The Task Force has two major missions: (1) to identify and survey the present status of student
financial assistance policies across the world, in relation to higher education and government reformin the broader context of socio-economic change, and (2) to provide the ministry and public withmeaningful insights and research ﬁndings on these policies and practices, in order to contribute to future
policy formation and to the development of higher education in Japan.
As the social and economic environment around higher education has undergone signiﬁcant changes,
the Japanese student financial aid system has come under severe criticism from the government andvarious stakeholders. How can we maintain and improve the system in a period characterized by ﬁscal
stringency, not only without harming accessibility to higher education but also in a way that increases
its efﬁciency and effectiveness? Further, how can we enrich the quality of higher learning in responseto the currently on-going reforms of higher education? We need to prepare an appropriate response tothese needs. This challenge will require careful examinations from economic, sociological and political
viewpoints.
The members of the Task Force held an international conference to lay a solid foundation for future
educational policy planning, seeking knowledge and wisdom from all over the world. All of theforeign guest speakers and invited participants to this conference were scholars and key ofﬁcials fromgovernmental and international organizations. The conference was held from December 6 to 8, 2006, inTokyo.

Acknowledgements
We are grateful for the financial and other support from the Ministry of Education, Culture, Sports,
Science and Technology, Japan, the Committee members, and the staff of our Center. We are especiallygrateful to Prof. Nobuyuki Kambara and Ms. Eriko Ishii who made great efforts to prepare for theInternational Conference.
Kazuo Okamoto
Director, the Center for Research and Development of Higher Education, The University of Tokyo

11. Introduction: Purposes and Analytical Frameworkof Student Financial Assistance
Masayuki Kobayashi
Center for Research and Development of Higher Education The University of Tokyo

1. Purposes of this Report
This report aims to get suggestions and policy implications for Japanese higher education reform,in particular, for student ﬁnancial assistance policy. In order to accomplish this aim we choose several
efﬁcient methods. First of all, we provide the broad and common analytical framework to investigate
this issue. Then we request distinguished scholars in this ﬁeld not only in Japan but also from overseas
to explain the present situation of the country comparing the situation with that of Japan. Furthermore
we had a discussion on each presentation and paper, and receive the ﬁnal paper from each scholar. In
this introduction we would like to explain more details of our research framework.

2. Analytical Framework
2.1. Higher Education Reform
Our ﬁrst framework is the common feature of higher education reforms in each country. We havevery similar situation and tasks in the age of global society. On the contrary each country has own
particular history, culture, economy, and society, and each higher education system and higher education
policy including student financial assistance have been affected from these characteristics. So our
ﬁrst analytical step is to distinguish common features and pattern from particular characteristics, while
identifying what shapes these features behind these above outlooks. Then we will try to acquire lessons
from various country experiences those are useful for Japanese higher education, policy planning,practices, and future research in Japan. We believe these lessons are useful not only for Japan but also
for other countries.
2.2. Student Financial Assistance Policy
Student ﬁnancial assistance is the broadest concept that includes student ﬁnancial aid, provision ofdormitories and canteens, and so on. However, these concepts are often used interchangeably, and we
use these two as synonym.
To analyze the higher education system in particular student ﬁnancial assistance policy and scheme,
we provide several analytical points. These have common features among countries.

32.3. Cost Sharing in Higher Education
The central theme of this report, “ Financial Assistance Policy ” should be interpreted in its broadconcept of the so-called “ cost-sharing for higher education ” in the complex set of policies of higher
education ﬁnanceWho does, will and should pay the cost of higher education ? This is the most fundamental question
to deal with the higher education policy, in particular, student ﬁnancial assistance policy. Historicallythe cost was almost paid by government, that is, the cost of higher education is public. Then the costhas been gradually paid by parents, that is, the cost is private. In Japan this is exactly the case. Recently
another shift from parents to student is prevalent. How do we think this trend ? This is the issue of “Cost
Sharing ” in higher education.
2.4. Background of Higher Education Reforms
This “ cost sharing ” could be considered as one of the most inevitable consequences from the common
mega trends around higher education across the world; stringent public ﬁnance, massiﬁcation of higher
education, societal, demographic and economic structural change, diversiﬁcation of students, and crisisof equality in educational opportunity. However the background of this shift is almost common among
various countries. Two factors are most important; massification of higher education and stringent
public ﬁnance. These are common futures and factors in advanced countries, and this trend is graduallytrue for developing countries such as China.
Most governments are facing very stringent public ﬁnance, and try to decrease the public subsidies touniversities. It is highly possible that this trend makes universities to raise their tuition fees. However,when the tuition fees are rising, this will cause a serious crisis for higher educational opportunities,
especially for disadvantaged group such as low-income families and ethic minorities. Therefore we needstudent ﬁnancial assistant scheme under the rising tuition fees situation. In other words, we underline
we need reforms of combination of tuition fees and student ﬁnancial aid simultaneously.
2.5. Higher Education Financial Policy
As we explained under the current situation, the higher education financial policy is one of themost important issues not only of higher education policy but also of governmental policies in various
countries. Especially the tuition fees policy in general and in public universities is one of the foci of thepolicy. Student ﬁnancial assistance is not dependent in these policies.
2.6. Net Tuition
It is very crucial to analyze the tuition fees policy and student ﬁnancial assistance together. In otherwords we often talk about tuition and fees and student aid programs separately, but from the viewpointof higher education policy it is necessary not to analyze these two separately. For several countries such4

as the USA and the UK, the policy of student ﬁnancial assistance is combination of “sticker price” or “listprice ” of the tuition fees and grant for student. Thus it is very important to analyze “ net tuition ” that is
the amount of the sticker price minus student grant.

3. Typology of Trends of Tuition Fees and Student Financial Aid Policies in
Various Countries
As we stressed, it is very important to analyze combinations of tuition fees and student financial
aid policies. From this point we show an overview of trends of tuition fees and student ﬁnancial aid
in Figure 1. Horizontal axe is the tuition fees policy, and vertical axe is student ﬁnancial aid policy in
Figure 1. Most public universities in various countries were located in the northwest of the ﬁgure, low
tuition/ high aid, but are moving toward right, high tuition fees policy, very rapidly. It is interesting thatthe trends of the UK universities and Chinese universities are very similar. On the contrary the other
European universities have not moved drastically. US public universities are shifting from low tuition/
low aid to high tuition/ high aid. But Japanese national universities are moving from low tuition/ low aid
to high tuition/ low aid. The same trend is seen in the case of Japanese and Chinese private universities.
The most distinguished feature of the policy in this figure is the high tuition/ high aid policy of US
private universities. One must be careful that net tuition is very different among these policies.
Figure 1 Trend of Tuition Fees and Student Financial Aid Policies in Various Countries
High AidUKChina

US Private

SwedenLow Tuition

High Tuition

Continental Europe
US Public FlagshipJapan Private

US Community Colleges
Japan National

China Private

Low Aid

Why the policies are shifting to high tuition/ high aid ? What are the factors behind the shifts ? We
would like to explain the factors behinds these trends (see Figure 2). Figure 2 is the same analytical axes
with Figure 1. The most important role of the traditional universities was to foster elites. Therefore lotsof public subsidies were spent for this purpose. The graduates were very small number and the public

5

ﬁnancial burden was not so heavy that the government could take low tuition or tuition-free/ high aid
policy.
The educational demand has been increasing as the age of massiﬁcation of higher education. Needs
of professionals are the driving force of the massification. As the amount of university students are
increasing, it is difﬁcult to maintain low tuition/ high aid while using public money, and the policy isshift to low tuition/ low aid. Furthermore the massiﬁcation of higher education is in progress, and thedemand for higher education is surpassed the supply of public universities. Then the private universities
were established to fulﬁll the gap. This is typical in Japan and in China. In this policy governments
provide scare subsidies to private higher education institutions.
Finally the high tuition/ high aid policy has appeared. This policy has two aims; to acquire excellent
students and to improve the university ﬁnance. Under this policy the net tuition fees of each student
is different. The net tuition of each student is decided by need-based and/ or merit-based dependingon each policy of HEIs. In any case the net tuitions are differentiated by these criteria because the
net tuitions are discounted by offering grants. From the view point of HEIs they can attract moredesirable prospective students by this discount policy. Advocators of this policy argue this policy is
efﬁcient because this is very different from the low tuition policy that needs heavy public or institutional
subsidies.
From the view point of cost sharing the four policies are very different. Public sharing is the largest
in low tuition/ high aid and the smallest in high tuition/ low aid policy. The midst is the low tuition/ low
aid policy. The cost sharing of high tuition/ high aid policy is very different from three policies. The
cost sharing is differentiated among students and/ or parents because net tuitions are different among
them.
Figure 2 Factors of the Shift of Tuition Fees and Student Aid Policy
High Aid

Acqiring Excellent Students
Supply of Elit es

Improving University Finance

Low Tuition

High Tuition

Expanding Educational Opportunities

Response to

Demands for Professionals

Increasing Educational Demand

Low Aid6

4. Analysis of Student Financial Aid
Ziderman proposed six factors to analyze student loan programs: schemes ʼ organizational structure,
student coverage, loans schemes ʼ objectives, funding sources, loan allocation procedures and collection
methods (Ziderman 2006, p. 27)1. When we analyze the tuition fees and student ﬁnancial aid policy, thecritical issues are following;
4.1. Political rationalization
Governments in most countries subsidize to universities, as the forms of free or low tuition fees,
student grants, and student loans, and therefore political rationalization of subsidies is very important2.
Usually the reasons of rationalization are two. One is the external effect of education and the other is toachieve equality of educational opportunity. Two are common in most higher education policy, but thestress is different in each policy.
4.2. Who pays ?
Who pays the cost of education is the issue of cost sharing. We suppose the payers are thegovernments, universities, private organizations and persons as the donors, and the parents and students.
4.3. Low tuition fees or grants
As I explained in Figure 1, there are four types of tuition fees and student ﬁnancial assistance policy.
It may seem that the low tuition or free tuition/ low aid policy is equivalent with the high tuition / highaid policy. However in a reality these are very different for students and parents. Johnstone argues thisdifference very clearly (Johnstone 1994. pp. 363-364 ***need check).
4.4. Grants and/ or loans
Grants and loans are two forms of student financial assistant programs. Grants are not repayable,
and therefore the governments or universities who give student aids pay the costs. Loans are repayable
and parents and/ or students pay the cost. Also important is who pays the interests of loans. The
governments and/ or universities pay the cost when the interests of loans are subsidized, and parents and/or students pay the costs when they are not subsidized. Of course the other alternatives may be chosen.
For example, partly the government subsidizes the interests. This is the case of Sweden, China, and1

He adds ﬁve more information to compare student loan schemes: year scheme established, scope of scheme, covers public or
private university enrollment, purpose of loan, and numbers of borrowers as percent of student enrollment (p. 116).
2 Ziderman purposed ﬁve purposes of student loan schemes; enable universities to maintain enrolment levels and quality, alternative funding, and a reallocation of funding away from the universities to other sectors of the education system that display
higher social rates of return (p. 29).

7

Japan.
4.5. Criteria: Need-based and/ or Merit-based
Another very important issue of student financial assistance policy is the criteria of assistance orprovision of student ﬁnancial aid. The most used criteria are two; need based and merit based. Eachstudent financial aid programs adapts one or both criteria. In Japanese student financial assistanceprograms two criteria have been using.
4.6. Effects on educational opportunity
It is very important to evaluate how the student financial assistance programs, that is, low tuitionor tuition free and/or student aid programs are effective to improve the inequality of educational
opportunities, especially in the case of need based aid. This effectiveness is also very important that it is
one of the reasons of the public subsidies for higher education.

5. Loan Collection Scheme
Another important issue in student loan programs is a loan collection scheme. Every loan has somedefaults inevitably. How can we decrease the default ? Income contingent loan repayments (ICLR) areintroduced in some countries for this purpose. ICLRs in some countries such as Australia and the UK
are interest free. On the contrary in the US the interest rate of ICLR is high, and the loan repayment
period is longer than the other repayment plans. Therefore the total amount of repayment of ICLR
becomes higher than the other repayment plan. So ICLR is not popular in the US. This shows the key
determinant of introducing ICLR is who bears the interest rate.
As for the situation of Japanese loan repayment defaults have been increasing. The reasons of thisincrease are enlargement of student loans to low achievers heavy loan burden for the low-income
borrowers, weak penalty, and unwillingness to pay. It is very important to distinguish unwillingness to
pay and inability to pay from the viewpoint of loan collection. How to distinguish these two are very
important for loan collection scheme.

6. Marketization and Privatization
One of the important issues in student assistance programs in Japan is the marketization of student
financial assistance programs, in particular, the argument of privatization of Japan Student Service
Organization, JASSO that is the governmental organization to provide public student loans. Some
Japanese government council such as the Financial System Council under the Ministry of Finance hasargued the privatization of JASSO. It argues that the efﬁciency of student loan programs will be better if
the private organizations deal with student loan programs than public organization such as JASSO. Is itright direction from the viewpoint of efﬁciency and equity ?

8

7. Suggestions for Japanese Student Assistant Program Reform
We asked every contributor to think about following issues to reform student assistant programs inJapan:(1)

Rationalization of student aid policy(2)

Reforms of Loan repayments(3)

Strengthen penalty ?

(4)

Alternative policy options to improve the current scheme ?

(5)Introducing income contingent repayment can bring an ultimate resolution ? If so, what
conditions/mechanisms should be arranged ?

(6)

Necessity of new grants for undergraduates(7)

Is tax reduction or exemption a better method as alternatives for student ﬁnancial aid ?

(8)

Privatization of JASSO or introducing Government Guaranteed Loans

8. Contents of this Report
The agenda of this report is following.
(1)

Cost Sharing and Student Financial Assistance(2)

Case Studies: Student Financial Assistance of Each country

They include background and current situations of student loan programs, and issues and prospects ofmajor policy and reform.
(3)

Searching Relevance for Future Japanese Policy from each national experience.

(4)

International Comparison

This report consists three parts. Part One has two reports. One is this paper by Kobayashi. The otherone is the keynote speech by Johnstone that provides the major issues and background of this topic frominternational perspective.
Part Two consists six reports of the case study of various countries. Contributors of each country
report were requested to include in their reports the following points:(1)

Situations in each country regarding higher education ﬁnance and the “ Cost sharing ” trends,
including comparison of public and private funding,(2)

Situations of tuition-fees policies and student ﬁnancial aid programs (grant and/or loan, andcriteria for the need-based and/ or merit-based),(3)

Equality of educational opportunity issues ( for example, loan burden problems hurt
participation in higher education), and(4)

Scheme of collection of loans ( for example, mechanism and issues related to income
contingent loan, and any argument between ICRP and the traditional mortgage loans).

Authors are requested to provide their reasonable objective and critical analysis on their topic, with9

theoretical-based reﬂection on issues and prospects of the current polices and practices in their country,
from their specialized approach and methodology, such as economics, political science and sociology.
At the end of the papers, they refer to opinions or the reasons why authors consider that their argument
could be relevant for future Japanese policymaking.
The first paper, by Johnstone, deals with “ cost sharing of higher education and student financial
assistance ” from a broad context using an international comparison. It provides an overview of this
topic. Among the case studies, the ﬁrst paper, by Shibata, on ﬁnancial aid policy in Japan, draws an
overall picture of Japan and related political issues in Japanese higher education. The second paper,by this author, also deals with Japanese student ﬁnancial aid policy, focusing on the issue of equity ofhigher educational opportunities. The third paper, by Callender, presents a detailed analysis of changes
in student aid policy under cost sharing in the United Kingdom. The fourth paper, by McIniss, explains
the introduction of HECS in 1989 and FEE-HELP, a new loan scheme in Australia. The fifth paper,
by Aarrevaara, draws a picture of the student ﬁnancial aid in Finland. The following paper, by Ding,
analyses the equality of educational opportunities in Chinese higher education.
Part Three has a paper by Usher to try an international comparison of student ﬁnancial aid.
References
Ziderman, A. (2006). Policy Options for Student Loan Schemes, UNESCO.
Johnstone B. D., 1994, Tuition Fees, International Encyclopedia of Education, Husen T. and T. N.
Postlethwaite, (eds.), Pargamon.

102. Higher Educational Cost Sharing and Student
Financial Assistance in Japan:
Policy Options in International Context
D. Bruce Johnstone1(State University of New York)This paper addresses the conference theme of student financial assistance policies and the policy
options that are presented to the Japanese government through the lens of the worldwide adoption of
cost-sharing. This term, for which I take some credit for popularizing in the mid-1980s (Johnstone1986),
is both a statement of a fact̶that is, that the costs of higher education are shared, mainly between
governments (or taxpayers), parents, and students̶and more importantly a description of a worldwide
policy shift of those costs from being borne predominantly (or even, at one time and for many countries
exclusively) by the taxpayers of the country to being increasingly shifted to parents and students.2
I will not elaborate here on the rationales for this policy shift, except to point out that, while there
is room for ideological contestation on some elements of policy (for example, on the proposition thatparents who can afford to do so should have some financial responsibility for the higher educational
expenses of their children̶which proposition is quite accepted in Japan, the USA, Canada, China but
not in the Nordic countries nor any longer in the UK), there is little debate over the notions that higher
education brings a substantial return to almost all of its recipients or that there is little equity (andalmost certainly considerable inequity) in having the average citizen taxpayer, who is substantially lessﬁnancially able than the average student will assuredly become, shoulder the entire expense of his or her
increasingly costly higher education (Johnstone 2002, 2004b).
Even more incontestable is the classic foundation of economic theory that the cost of any good orservice can be viewed̶especially for the purpose of assessing the worth of the product or the costeffectiveness of its production̶as the lost value or beneﬁt that would have come from the next bestalternative that must now be foregone by having used the productive resources to produce this particular
product or service. In very concrete terms to the subject of this conference, the taxpayer dollars spent by
a government that has decided to cover all of the costs of higher education (which for some countries
used to mean all of the costs of instruction plus the costs of food and lodging and pocket money)̶
1

D. Bruce Johnstone is Distinguished Service Professor of Higher and Comparative Education Emeritus at the State University of New York at Buffalo and Director of the International Comparative Higher Education Finance and Accessibility Project.
2 Recent general references on cost-sharing in international perspective include Johnstone (2006), Teixeira et al (2006), Tres
and Segrera (2005), Vossenstyne (2004), and Woodhall (2002).

11

when there is unmistakable evidence that parents and even students (provided the availability of loans)are more than willing to shoulder some of the costs means the public having to forego what some ofthose taxpayers dollars could have been used for instead. And depending greatly on the country, thesehigh-priority public expenditures foregone by the rapidly escalating costs of higher education might be
additional expenditures on elementary or secondary education, or on public health, or on needed public
infrastructure, or environmental restoration, or the special needs of children or the aged.
Although most countries outside of Continental Europe have accepted, however reluctantly, the needfor some sharing of instructional costs via some level of tuition fees (and even the Netherlands, Austria,
Portugal, and a few of the German states have adopted modest tuition fees), cost-sharing̶including
the entire panoply of tuition fees, subsidized food and lodging, grants, loans, and other costly beneﬁts̶
remains both political contested and technically complex (Johnstone 2006a, Teixeira et al 2006).
Therefore, it is entirely appropriate at this time for Japan to reassess this set of policies, to examine thegoals of its cost-sharing and student ﬁnancial assistance schemes, and to consider what policy options
it realistically has in light of these goals and whatever the current budgetary constraints. Particularly
appropriate would be a reassessment that includes the following issues or questions:・The appropriate tuition fee or fees to be charged in the public institutions of higher education, as
well as the appropriate variation in such tuition fees to be established, allowed, or encouraged as
between different universities or between different programs within the same university.
・The appropriate level of taxpayer subsidy (if any) for other expenses that are essential to the pursuitof higher education, such as food, lodging, travel, books and other educational expenses, and othercosts of student living.
・Who is expected to pay a tuition fee and the other expenses of higher education that are not borneby the taxpayer̶more specifically, is it to be the parents, the students, some philanthropists, orsome combination of the aforementioned?
・How higher educational accessibility̶and thus social justice̶is to be achieved in the face ofexpenses that are more than some parents and/or some students can be expected to shoulder?
・The degree to which a private higher educational sector is thought to be in the public interest andtherefore to be a legitimate claimant on public subsidies̶and if it is so deemed (as it has been
in both Japan and the United States), whether such public subsidies should be paid directly to theprivate colleges and universities, or to the parents and students to then ﬂow to the institutions via
the tuitions fees that have now been made affordable via the governmentally-provided grants and/or
loans.
・The degree to which the available taxpayer-borne subsidies, spent to achieve a variety of
appropriate public purposes ( likely including increasing access, the encouragement of higheducational achievement, the steering of higher educated manpower into particular occupations
and/or venues, and the support of a more tuition-dependent private sector) are more cost-effectively

12spent on direct grants (based either on need or merit or combination of both) or on loans and theso-called effective grants embedded in the loan subsidies. (In Japan for example, the interest freeloans represent a very substantial subsidy that will only increase as interest rates in Japan rise tolevels more like other advanced industrial countries. And even the so-called low interest loans,with no interest charged during the in-school years or the grace period and charged thereafter at a
subsidized rate, contain considerable subsidization̶effective grants̶that carry opportunity costs
suggesting public resources that the government might better spend, say, on debt forgiveness forstudent borrowers whose earnings turn out to be low, or on borrowers who choose occupations withlow pay but with high public value.)
We will turn to the essential questions that must be answered in all countries contemplating or
reassessing cost-sharing in their systems of higher education. But first, let us consider the Japanesecontext.

The Japanese Context.
Japan has one of the largest and most complete systems of higher education in the world. Somefeatures relevant to this reassessment include:3
・Some 87 national universities, all of which to some degree include the defining features of theclassical Western research university: that is, multiple faculties, most of which grant the highest
degree and a scholarly emphasis oriented substantially to research. While still public in thesense of state ownership, major public funding, and still comparatively heavy state steering by
the Ministry, these universities were granted “ corporate ” status in 2004, For the purpose of thispaper, corporatization suggests greater (although not yet complete) responsibility for setting fees,
providing grants or discounts, and otherwise assuring that delicate balance between institutional
ﬁnancial viability (in the face of certain declining state resources) and maintaining accessibility.
・Some 75 local public universities and other institutions of higher education that are largely locallyfunded and that are less selective and more oriented to teaching and to vocational and professional
preparation.
・A very large private sector, with more than 500 institutions ranging from two year colleges withminimal selectivity to a few private research universities which, in spite of endowments far below
the top US private research universities, are prestigious research universities in every sense of word.
These private universities receive considerable public resources, including regular (albeit declining)
subventions for current expenses, state assistance for facilities construction and improvement
as well as for research equipment, and eligibility of private university students to the subsidized
student loan system.4
3
4

Sources for “The Japanese Context” include ICHEFA (2006), Shibata (2006), and Yonezawa and Kosugi (2006).
See Japan under the website of the International Comparative Higher Education Finance and Accessibility Project

13(Novem-・A demographic decline that is already manifested in declining numbers of high school graduates.
While other industrialized countries face the same demographic phenomenon, the effect on
Japanese higher educational institutions is made more serious by: (a) the relatively low rate ofimmigration (considering the prosperity of Japan and the relative poverty of many of its Asianneighbors); (b) the currently high participation rate (which means that the smaller number of 18
year olds is unlikely to be fully compensated for by increasing participation rates alone); and (c) the
relatively low number of international students seeking to study at Japanese universities (particularly
considering their capacity as well as their academic excellence).5・A policy of cost-sharing not unlike the US, with the following elements:
Tuition fees at the national universities, 81 (out of the total of 87) of which charge themaximum allowable under curr ent law: ¥535,800 [$4580].



A one-time entrance fee charged by most universities, which for most national universities
in 2006 was ¥282,000 [$2410].



Minimum subsidies for institutionally-provided food and lodging

Great dependence on a mainly tuition fee-dependent private sector, absorbing in 2006 morethan 73 percent of all students̶and consequently providing a high level of national higher
educational participation at less expense to the state than could be provided with all public
institutions.

・A high level of parental contribution to the higher education of their children. Given the hightuition and very high one-time entrance fees in the public universities, the high fees in the private
universities and colleges, the high costs of student living, and the minimal (at least as compared to
the United States) endowment funds and current philanthropy that otherwise allow extensive “ pricediscounting, ” the ﬁnancial burden of higher education on the Japanese family is extremely high.
According to the World Bank Institute, the average share of household income spent on tertiary
education in Japan at nearly 60 percent (similar to South Korea) is far above the United States atapproximately 35 percent and closer to ten times the percentage in most of the European countries(World Bank Institute p. 109).
・A ﬁnancial assistance system composed mainly of loans (albeit at no, or very low, rates of interest).
The total volume of student lending in 2004 was ¥660 billion [$62 billion] to 930,000 students fromthe Japan Student Services Organization (JASSO), which accounted for nearly 70 percent of total
ﬁnancial assistance (Shibata 2006).

5

ber 20060. http://www.gse.buffalo.edu/org/inthigheredﬁnance/index.html
This low rate of international student intake in Japan may be largely a function of the relatively small number of potential
students in other countries who have a sufﬁcient mastery of the Japanese language (particularly in comparison with the verylarge and growing numbers of students seeking an out-of-country higher educational experience who have a sufﬁcient masteryof English as their second language).

14

・A very high level of subsidization of the JASSO loans, which are either interest free (for 460,000
recipients totaling ¥272 billion) or low-interest (630,000 recipients for a total loan volume in 2006of ¥528 billion [$4.5 billion].6 Thus, the student loans carry a large component of effective grants inthe form of streams of repayment subsidies, although such a “ loans only ” scheme, even if by somemeasures, is over-subsidized, still allows more yen to go to more students than would be possible
with a student ﬁnancial assistance program of grants only.7
・A low take-up rate on the available student loans. Given the extremely high ﬁnancial burden of
higher education on the average Japanese family, and given the extensive subsidization and fairly
generous eligibility criteria for the governmentally subsidized student loans, the take up rate for the
JASSO student loans is surprisingly low̶reported by Shibata (2006, p. 9) at just over 23 percent
in 2004. In theory, what seems to be a problematically low take-up rate may simply mean that most
students have enough money from other sources (although the high level of subsidization and theheavy burden on parents cast some doubt on this as a likely explanation). Or, loan availability may
be less than generally thought to be because the academic merit criteria exclude more students
than the selection policy intends. Or, the low take-up rate may be evidence of debt aversion̶even though the interest rates, at least by international comparison, are so low and the repayment
period is so generous. And if there is some debt aversion̶that is, students avoiding debt undercircumstances in which borrowing (especially on such favorable terms) by most measures would bequite economically rational̶who is it that is debt averse? Is it the students who are debt averse̶
preferring extensive term time employment, or an exceptionally low standard of living, or evenburdening their parents to what appears to be such easy credit? Or is it the parents who are averse
to having their children go into debt? Debt aversion is a commonly claimed argument against costsharing and a policy reliance on student loans (Callender 2003). At the same time, debt aversion is
generally presented as highly culture speciﬁc, and there clearly needs to be more research on why
the take-up rate on Japanese student loans seems so low.

Worldwide Issues in the Adoption or Re-examination of Cost-Sharing
In the context of these features of Japanese higher education, the issues or questions dealing with costsharing and access deal mainly with either tuition fees or ﬁnancial assistance and especially in questions
and issues having to do with student loan schemes. This section of the paper will look at certain issues orquestions that must be addressed by any country either instituting or re-examining its policies of tuition

The “low interest” loans are capped by law at 3% and repayable over 20 years. Thus, the effective subsidy of the low interest
rate (that is, the cost to the government) is magniﬁed by the very long repayment period. This subsidy (barring changes in thelaw) will, of course, increase as the Japanese economy continues to come out of its long period of economic stagnation, neardeﬂation, and exceptionally low market rates of interest.
7 See Johnstone (2006b) for a fuller explanation of the trade-offs between grants and subsidized student loans.
615

fees and student ﬁnancial assistance. We will begin with issues and questions related to tuition fees.

Tuition fees
Tuition fees refer to mandatory charges imposed on all students to cover a share of the underlying
costs of instruction. Whether there should be tuition fees is not an issue in Japan. What is or might beissues are the following:
1. Who should pay
Speciﬁcally as between the parents (at least those who are deemed to be ﬁnancially able) paying upfront, or students paying via a deferred obligation, or a loan? Japan, like the United States, Canada,
China, and many other countries, requires tuition to be paid up front and considers the tuition fee to be aproper obligation of parents̶at least those who are able to pay, and at least through a Bachelors degree
or until the student/child is of a certain age (say, 24 years old). However, in recent years the questionof whether the tuition fee obligation was to be paid by the parent up front or by the student via a loan
has become seriously (and sometimes deliberately) confused by the political popularity of deferredfees, particularly when they can be made to appear to be something other than loans that the student
has to repay (frequently at a near market rate of interest). Because of this confusion (or sometimes
obfuscation), deferred fees can be made to be quite politically popular, especially when the very concept
of cost-sharing is still a contested proposition (as it is not in Japan, but is very much so in much of therest of the world), as neither the parent nor the student need face any immediate cost. Furthermore,
although a deferred fee is still a tuition fee cum interest bearing loan, it is sometimes construed as
something fundamentally different, particularly when the repayment obligation is set as a percentage of
future income, which is sometimes wrongly portrayed as always less costly and in all other ways better
than a ﬁxed schedule loan.8
Deferred fees are the approach ﬁrst taken by Australia and New Zealand, followed by Scotland andthen, beginning this year, the rest of the UK, and more recently by Ethiopia. Students are attracted
to the deferred fee because it seems to make them more independent of their parents, and if the loan
is portrayed as something other than a tuition fee and a debt that they must repay (as in the Scottish“ mandatory deferred obligation ”), it can almost seem as though there is no real tuition fee.
However, for Japan to adopt the Australian deferred fee and move away from the currently wellaccepted (even if not exactly beloved) up front fee would be to shift the obligation from the parent to thestudent and to abandon a lucrative source of revenue that the government is clearly not going to replace.
Thus, the lost revenue would have to be replaced by additional indebtedness carried by the students̶orelse not replaced at all, resulting in a disastrous loss of revenue for the universities to absorb (on top of
8

This point is elaborated upon on pages 23-16 below.

16the revenue they are already preparing to lose from the promised decrease in state funding).9
2. The proper amount of the tuition fee:
The appropriate amount of a tuition fee is best approached̶conceptually if not politically̶asa percentage of underlying undergraduate institutional operating costs that are to be covered by thetuition fee. The advantages of the percentage of underlying instructional costs method of establishing
an appropriate tuition fee are several. First, it is conceptually defendable in that it recognizes theappropriateness of constant shares (albeit of increasing underlying costs). Second, it recognizes theappropriateness of greater tuition fees for the more costly forms of instruction. Third, it treats students
equivalently or evenly (albeit charging more for the more costly programs). Fourth, it avoids the need toreturn to the political process for the necessary tuition fee increases over time. And ﬁfth, it reinforces theobligation of the government also to maintain its share as the underlying per-student costs increase.10
While tuition fees vary widely around the world, Marcucci and Johnstone (2007 forthcoming) report a
range of public college/university tuition fees in terms of the percent of underlying costs of instruction as
follows:
・Low or nominal(less than 5 percent: France, Germany)

・Medium low(5 to15 percent: UK, The Netherlands, Portugal)

・medium(15 to 30 percent: China, Japan, Canada, some US colleges)

・medium high

(30 to 40 percent: Most US universities)・high( more than 40 percent: Mongolia, some US universities for non-resident
undergraduates and for advanced professional schools)

By these criteria, Japanese tuition fees are “ medium, ” although the one-time entrance fee raises thefirst year burden almost to a level of “ medium high. ” The high percentage of family income alreadygoing to higher education should discourage any sharp general increases in tuition fees. At the same time,
the general afﬂuence of the country coupled with the abundant ﬁnancial assistance, the high participation
rate, the apparent cultural / political acceptance of tuition fees as well as high parental contributions, plus
the determination of the government to slightly decrease public spending to higher education would also
9This tendency of deferred tuition fees to discourage parental contributions can be at least partially overcome by encouraging
̶although not requiring̶payment up-front, perhaps at a discount, and also with the admonition that up-front payments will
limit the studentʼs indebtedness.
10 Tuition fees must also increase over time, essentially in accord with the underlying cost increases in the costs of instruction,and this annual policy decision, especially in those countries in which the fact of cost-sharing and the appropriateness of tuition
fees has been generally accepted̶may be far more contested that the fees themselves. The best policy is almost certainly (atleast in theory) one that allows (or better, one that requires) the tuition fee to increase over time essentially automatically in accord with the per-student increases in the costs of instruction̶which is likely to be generally in accord with the rate of increasein faculty and staff compensation (Johnstone, 2006a, 2004b). Two advantages of such a policy are that it (a) depoliticizes theprocess and reduces opportunities for politicians to arouse student protests that mainly injure the universities; and (b) implicitly
obligates the government to increase its per-student contribution.

17

caution against any signiﬁcant decrease in the Japanese standard tuition fee.
3. The degree of, and criteria for, variation in tuition fees:
A more critical issue in Japan than the level of the standard fee is the issue of whether there ought tobe variation in the level of the tuition fee. For example, tuition fees around the world vary according tocriteria such as:the underlying instructional cost of the program,the level of the degree (that is, license, matrice, or doctoral),

the sector or type of public institution (that is, national or local),the expected earnings of graduates (which would theoretically allow higher tuition fees andhigher levels of student debt in some ﬁelds),



the market demand for the degree.

In Japan, the tuition fee levels are held approximately constant and “ moderate ” for what seems tobe purely political reasons. If individual institutions had more freedom to set (that is, to increase) theirtuition fees, there could be expected to emerge a “ spreading out ” of tuition fee levels mainly according
to the market. Thus, the more prestigious and selective universities (particularly in Japan the imperial
universities) would be able to increase or to reset their tuition and other fees̶and widen the current
spread of university wealth and prestige. This widening̶effectively making the wealthy and prestigious
even more so̶is both expected and accepted in the United States and the United Kingdom, although thewidening, or spreading out, of wealth and prestige occurs more from the great variations in endowments,
annual giving, research support, scholarly prestige, and undergraduate selectivity than from any
signiﬁcant spreading of tuition fees. However, such institutional differentiation is much less acceptablein Continental Europe, where all public universities are nominally equal, and was recently strongly
criticized by the political left in the UK.11
Market sensitive variations in tuition and other fees exist in many countries and can be established andjustiﬁed by any or all of the following:・the generally higher underlying costs of certain programs, such as laboratory or high technologycontent programs;
・the generally greater private benefits in the form of higher salaries and greater status coming tostudents graduating from certain programs, such as advanced management, finance, technology
medicine, and the like;・similar to the above-mentioned variation in salaries, the greater ability to repay a larger student loan
11 The academic and political left in the England seems determined to prevent Oxford and Cambridge from gaining even moreprestige and wealth via their market position̶which stance was behind their strong opposition to the ability of some universities to charge so-called top up fees. Top up fees did become law, but the maximum was sufﬁciently low that nearly all universities charge the full top up.

18

debt for graduates of such programs;
・the likelihood that a disproportionate number of students who gain access to the more selective
and remunerative programs and/or institutions are from more afﬂuent families who will be able toafford the higher fees;
・as a variant of, or following upon, the above-mentioned principles, the greater market demand forcertain institutions and/or programs, which is generally sufﬁcient to rationalize a higher price in acompetitive market economy.
More important may be the presumed interest on the part of the Ministry for more Japanese
universities rising in the ranks of those universities appearing on any of the so-called international league
tables.12 Aside from the built-in bias against non-English-language institutions of higher education, andaccepting all of the weaknesses of league tables generally, an upgrading of the international reputationsof Japanese universities will almost certainly happen only selectively̶that is, by upgrading thosealready ranked, but arguably below their potential. And this upgrading would likely be advanced byallowing those universities that are in a market position to do so to increase their tuition fees above thestandard fee that limits all of the 87 national universities.
4. The authority to set tuition fees for public higher educational institutions.
The authority to set and to change tuition fees is vested in different entities in different countries:
resting in some countries in the central government, in others in the state or provincial governments, andin still others within the institutions themselves. The problem in many countries is the easy politicizationof tuition fees. At the same time, heads of governments, ministers, and legislatures or parliaments will
not easily give up their roles in such a potentially politically contentious issue. Therefore, a scheme thatmaintains governmental authority for the principle of a tuition fee, and that also provides a principle
for the adjustment of the fees over time, but that removes from the government the actual annual settingof the tuition fee or fees may be better able to balance the legitimate interests of students, families, andinstitutions.
In Japan, this may require reconsideration of the standard tuition fee and to provide additional
institutional latitude both to increase this fee as the underlying costs of instruction go up (and presumingthat the government does not increase the per-student current budget allocation commensurately) and12 Among the “Worldʼs Top 200 Universities in 2005 according to the Times Higher Eduction Supplementʼs (for all of thefaults of league tables in general and of the Timesʼ listings speciﬁcally), are nine Japanese universities: Tokyo (#16), Kyoto(#31), Tokyo Institute of Technology (#99), Osaka #105), Nagoya (#129), Tohoku (#136), Hiroshima (#147), Kobe (#172), andShowa (#196). The United States, in contrast has nine universities in the top 14; The UK nine in the top 73 (and six in the top30); and Australia nine in the top 80 (and ﬁve in the top 40). While this ranking illustrates clearly the bias toward English language universities, it also illustrates that Japanese universities, for their great numbers and ﬁnancial resources and considering
the very high academic reputation of Japanese secondary education, do not yet enjoy an international reputation commensuratewith their potential (Times Higher Education Supplement, World University Rankings, October 2005).

19

also, per the discussion above, for some institutions under certain circumstances to establish higher
tuition fees.

Financial Assistance: Grants and Loans
The shifting of higher educational costs from governments or taxpayers to parents and students
raises the issue of how access and equity are to be maintained in the face of this shift.13 As virtually all
countries profess adherence to a policy that at least purports to assure higher educational opportunities
to academically able secondary school graduates regardless of the socio-economic status or otherattributes of the family, all countries adopting any signiﬁcant cost-sharing combine their tuition fees andother student- or family-borne expenses with some program or programs of ﬁnancial assistance that are
targeted at those who would otherwise be ﬁnancially unable to access higher education.
1. Criteria for the awarding of ﬁnancial assistance.
Access to higher educational opportunities is a function both of the criteria for admissions and of thecriteria for ﬁnancial assistance. Virtually all educators acknowledge that measured academic attainmentis greatly affected by the quality of prior schooling and by the educational enrichment provided by thehome̶which factors, in turn, are very much a function of available resources, including the ability toaccess private schooling and tutors as well as the educational levels of the parents and the academicorientations and aspirations of classmates. Similarly, most analysts in most countries acknowledge thatthe barriers to the equal higher educational participation of children of low socio-economic or ethnic or
linguistic or rural status, or of girls, is far more than a matter of providing targeted ﬁnancial assistanceto some university-age youth. Rather, inequality of higher educational opportunity has its origins deepin local and family culture, which begins to “ sort out ” those who will and will not attain postsecondary
education at very early ages.
In short, critical policy decisions need to be made about the degree to which access to university level
education will be limited to entrance examinations only, and (more to the point of this paper) the degree
to which access to free or low tuition higher education and/or to ﬁnancial assistance will be based on thesame measures of academic preparedness̶in which case the assistance will go in large measure to thechildren of the more afﬂuent and professional classes who would have attended anyway̶as opposed
to ﬁnancial assistance being based more on criteria of ﬁnancial need and other factors and thus go to thechildren for whom the assistance is likely to make a difference between attending or not.
Access to the prestigious national universities in Japan is based on measured academic merit, and theequity of that selection is far beyond the scope of this analysis. However, while there is post secondary
13 Parenthetically, it is instructive to out that those countries in which the state bore all higher educational costs (including thecosts of instruction and the costs of student living) exhibited essentially the same disproportionate representation in the universities of the children of the educated and elite as did those countries that embraced cost sharing policies

20educational capacity in Japan for virtually all high school graduates, the access to ﬁnancial assistance isbased on a combination of academic merit and ﬁnancial need, thus seemingly targeting the assistance on
those for whom the ﬁnancial aid award is most likely to make a difference.
2. Financial assistance through non-repayable grants or loans:
The next decision in formulating a ﬁnancial assistance policy is to decide on the mix of non-repayablegrants and loans (or deferred tuition fees). In theory, because a grant is an outright expenditure and a
student loan is an asset, which may not be repaid in full but which ought to have some cost recovery,a given level of governmental expenditure ought to be able to support a considerably greater volumeof student loans than of student grants. And if access, or extending higher educational participation
to potential students who would be unable to attend in the absence of the financial assistance, is theprincipal goal, and if there are indeed substantial monetary returns to personal investments in higher
education, then a loan should (again, in theory) be almost as effective as a grant in furthering additional
higher educational participation, and a policy of student loans thus more cost effective than a policy ofstudent grants for the same amount of public resources.
For this reason, many countries, including the United States, the United Kingdom, Canada, andAustralia have been shifting what was formerly predominantly grant support to predominantly loan
support, and many other countries, including Russia and most of the former Communist countries, havecut back signiﬁcantly on grants and stipends and are trying to develop workable loans systems (Johnstone
2006c). Japan, with student loans as the predominant means of governmentally-sponsored student
financial assistance, is thus among the many countries evidently believing loans to be a more costeffective form of governmental student ﬁnancial assistance expenditure.
However, the cost-effectiveness of student loans depends on two factors: (1) the true cost of the loan
program, which in turn depends on the costs of any governmentally covered guarantees as well as aninterest subsidization: in short, on the volume of dollars or yen that can be put in students' hands thougha dollar's or a yen's worth of subsidies; and (2) the effectiveness in terms of the additional and more
equitable participation that the dollar's or yen's worth of subsidy can procure via student loans comparedto the additional participation that might derive from the admittedly smaller (but how much smaller?)volume of ordinary grants or non-repayable stipends that those public taxpayer dollars and yen could
have procured. Part of the answer to this difﬁcult question depends on the relative effectiveness of grants
versus loans, which requires more information on the degree and nature of debt aversion, discussed
above. Part of the answer to the question of relative cost-effectiveness also depends on the volume ofstudent lending that a dollar or a yen can generate̶which is a question of costs and the extent of loan
subsidization, to which we next turn.

21

3. Loan subsidies and recovery ratios.
The distinction between grants and loans is not a precise one for the reason that virtually all student
loans that are generally available (that is, not limited to the children of credit-worthy parents or tostudents only in the most elite and ﬁnancially remunerative professions like medicine or management)
carry substantial elements of governmental, or taxpayer-borne, subsidies. An indirect but very real
governmental subsidy reflects whatever level of governmental guarantee may be provided, whichremoves defaults as a cost that must be recovered from the interest premiums paid by all borrowers. The
direct subsidies reduce the interest charges below the rates that would otherwise be required to cover
the cost of the money itself (that is, to compensate the savers) as well as to cover the cost of servicing
and collecting the loans over the entire period that the borrower has the money. The interest charged on
student loans (and therefore whatever interest subsidies are built into the student loan scheme) is often
differentiated according to the interest charged:
・while the student borrower is still in school, or the in-school rate̶which in some countries andsome loan programs is zero, but in other countries or plans may be at the regular repayment periodrate, albeit generally deferred and thus accruing during the in-school years;
・during a grace period that sometimes continues the in-school subsidy for a period of time (generally
one year but sometimes longer) between the end of schooling and the beginning of employment (andthe presumed ability to begin regular repayments); and・during the actual period of repayment.
Whereas much of the indirect subsidization of the governmental guarantee (that is, the taxpayerborne losses arising from defaults) is both unavoidable and unpredictable (although good collection
management and appropriate repayment periods can substantially reduce losses due to default), thelosses due to interest rate subsidization̶that is, the effective grant embedded in the loan and accorded
to all borrowers̶is totally a matter of policy. In other words, all student loans̶whether mortgage
style, income contingent, or in the form of deferred tuition fee obligations̶can be made more or lessgenerous (or more or less costly to the taxpayer) by design.
The student loans provided by the Japanese Student Services Organization (JASSO), which provides
almost 70 percent of all student lending in Japan, are either interest free altogether or are low interest,
which are at a zero nominal rate during in-school and grace periods and at a governmental borrowing
rate during the repayment years̶which has been below the legal maximum of 3 percent (Shibata 2006, p.
6-7). While interest rates at less than 3 percent appear particularly low by world standards̶suggestinga level of subsidization of Japanese student loans that would appear commensurately high̶the lowinterest student loan interest rates in Japan, at least during the repayment period, have actually beenclose to a market rate and reﬂect more the prolonged period of economic stagnation and historically low
interest rates in Japan than any particularly generous level of subsidization.
Nevertheless, student loans in Japan are subsidized, and the subsidy threatens to increase greatly as

22the Japanese economy continues its current (2006) recovery and as market interest rates begin to exceed
the 3 percent cap. As in all governmentally-sponsored student loans in all countries, the extent of thesubsidy will be a function of: (1) the rate or rates of interest paid by borrowers between the origin of theloans and their full amortization, (2) the appropriate discount rate (which depends on the market rate[s]of interest for a particular country or currency at a particular time, and which generally reflects the
anticipated rate of inﬂation), and (3) the standard repayment period. This subsidy̶which may also beviewed as an effective grant embedded within the loan̶is the difference between the original amount of
the loan and the discounted present value of the anticipated repayments. Thus, virtually all student loans
other than the strictly commercial loans available from a bank and carrying no governmental guarantee
or sponsorship can thus be viewed as composed of two elements: (1) the true loan, which is that portionof the original amount borrowed that the stream of repayments actually amortizes at a reasonablediscount rate; and (2) the effective grant, which is the difference between the amount borrowed the “ trueloan ” ̶or alternatively, the discounted present value of the stream of subsidies.
Not counting the losses from defaults, a generous, highly subsidized student loan̶that is, one that
contains a substantial effective grant and a commensurately low anticipated recovery̶would featureelements such as: no interest charged during the in-school years, a long grace period, a rate of interest
charged during the repayment period that was far below the market rate of interest, and a lengthy
repayment period. In contrast, a loan that is minimally subsidized̶which could be said to have a small
effective grant and a commensurately high anticipated recovery rate̶would feature elements such as:interest charged (although probably accrued) during the in-school and grace periods, a rate of interest
during the repayment years that was at least close to a market rate, and a relatively short repayment
period.
The reason that the size of the effective grant̶or its mirror, the loan recovery rate̶matters is
because each dollar or yen spent subsidizing a student loan scheme is a dollar or a yen that could
have been spent on more outright grants, or on other forms of student assistance̶or even on lower
tuition altogether. At least in theory, then, there exists a trade-off between the effective grants carried
within a highly subsidized student loan scheme and direct grants, stipends, and other forms of student
ﬁnancial assistance (such as subsidized student housing or food). And the proper mix of subsidies fora particular country depends on the country-specific goals of the financial assistance scheme and thecost effectiveness of each component in achieving these goals. Again in theory, a minimally-subsidized
student loan scheme is more cost-effective than a program of direct grants or stipends in achieving most
purposes of most student ﬁnancial assistance schemes, the common object of which is to put money inthe hands of the students at the least governmental cost. And there are some purposes of some student
financial assistance schemes̶such as steering graduates into professions and venues of the greatest
public good̶that can only be attained by providing the initial assistance as a loan, the major subsidy
component of which would be repayment forgiveness for those who practice in certain high public value

23

professions and/or venues.
The major problem in most countries that rely on student loans for the promotion of access is toohigh a level of subsidy (alternatively, too high an effective grant component) when there is little or noevidence that these public dollars are a cost-effective way to secure the desired student behavior. Toooften, politicians create the features̶such as very low interest rates and long repayment periods̶thatthey believe will mollify students and do not recognize that in so doing they are effectively spending
governmental money that might have been spent in other ways. Sometimes, politicians (and scholars anduniversity leaders and bureaucrats) do not fully understand the concept of discounted present value, or
do not care about the expenditure of public money in the future, or are ambivalent about cost-sharing tobegin with and believe that students should at be entitled to the most favorable terms on the loans thatare being imposed as part of a generally unpopular set of cost-sharing policies.
The Japanese ﬁnancial assistance program, by relying mainly on student loans and by conducting theseloans programs in a reasonably cost effective way with reasonably low rates of default and collection
costs, seems to be in reasonable shape, comparing effectively in cost-effectiveness and recovery rates
with student loan programs in the United states, Canada, the Netherlands and Scandinavia. The interestfree and the low interest loan programs, however, should be re-examined to determine whether thesepotentially costly features actually have some intended effect on student behavior, or is
4. The form of the repayment obligation.
Although the degree of subsidization̶which determines the principal real cost to the government aswell as the real desirability or at least inexpensiveness to the borrower̶is the most important issue inthe construction of a student loan policy, the most visible as well as the most frequently misunderstoodis the form of the repayment obligation. This obligation can take one of two basic forms, with many
variations of each and with “ hybrids ” of the two also possible.
The ﬁrst is the ﬁxed-schedule, or conventional mortgage-type, loan. This loan carries a rate of interest
expressed as an annual percentage of the amount borrowed, a repayment period, or the amount of time
the borrower has to repay the loan, and repayment terms, such as whether the payments are to be in equalmonthly installments, or installments that begin small and increase over time, or some other arrangementthat yields a stream of payments sufﬁcient to amortize the loan at the contractual rate of interest. Japan,
Canada, The United states, and most other countries with student loan programs express the repayment
obligation in this way.
The second form of repayment obligation is the income contingent obligation.14 Such a plan carries acontractual obligation to repay some percentage of future earnings generally until the loan is repaid at acontractual rate of interest, or until the borrower has repaid either a maximum amount (which can release
14 The literature on income contingent loans is extensive. See e.g. Chapman (2006). Chapman and Ryan (2002), Johnstone(1986, 2004a, 2006c), and Usher (2005).

24

the high earner), or for a maximum number of years (which can ultimately release the low earner). That
which is stipulated in the loan contract is the annual repayment burden, or the percentage of earnings
that must go to loan repayment (which may be ﬁxed for all income levels, or progressive, applying toearnings only above some threshold and/or increasing as incomes rise). That which varies according toincome or earnings is the repayment period and, at least for some low earning borrowers, the ultimate
cost of the loan. The Australian, New Zealand, South African, and UK student loan programs all feature
income contingent repayment schemes. In addition, the US has an income contingent repayment option
within its Direct Loan Program.
As in conventional student loan programs, an income contingent loan program is likely to subsidize allof the borrowers to the degree that even those who repay “ in full ” will have repaid at a subsidized rate̶
that is, at a rate that is generally set below the market rate of interest (or even below the rate of interest
charged to the best and most credit-worthy borrowers, or even to the government itself). For most income
contingent loan borrowers, then, repaying income contingently as opposed to conventionally merely
affects the shape and the length of each individual repayment period rather than the ultimate amount (inpresent value) that will be repaid. However, all income contingent loans have a provision for forgiving
the remaining debts of some of the lowest earning borrowers who reach some maximum repayment
period or some maximum age with a debt still outstanding. The present value for any particular lifetime
earnings profile of this so-called low lifetime income subsidy depends on the terms of the income
contingent loan contract. For example, for any given set of assumed borrower lifetime earnings proﬁles,a high percent of income required for repayment together with a long repayment period will minimize
the number and amounts of remaining debts to be forgiven and reduce the subsidy cost to be recovered(usually from the government). In contrast, a low percent of income and a short maximum repayment
period will (again, for any given set of assumed borrower lifetime earnings proﬁles) increase the numberof borrowers who are likely to reach the end of their maximum repayment period with substantial debts
to be forgiven̶and of course increase the cost to the lender (presumably the government).
The source of the subsidies for an income contingent loan program in most cases is the government
itself, which may subsidizes all borrowers to the extent of any built-in interest subsidization, but also
will ultimately forgive the remaining debts of the low lifetime earners in the same way that it might electto make up the shortfalls from borrowers who simply default, or might provide other kinds of grants or
subsidies to students on the basis of their low family incomes at the time they were in the university.15
Expressed another way, the government in such an income contingent loan program is electing to
15 In theory, the source of subsidy might also be the high-earners who, in a so-called mutualized plan, would ﬁnish their repayments having repaid at a premium rate of interest, thus effectively subsidizing their low-earning borrowing colleagues andproviding the loan program with an average break-even interest rate over all of the loans. The principal conceptual ﬂaw in thisconcept̶perhaps explaining why there are no such generally available mutualized plans in operation̶ is that students who
reasonably anticipate high lifetime incomes will decline to participate, at least in any voluntary scheme, thus depriving the planof its necessary source of subsidies to protect the low earners.

25subsidize ultimately those who turn out to have low lifetime earnings, just as it may, in a conventional
need-based grant program, be electing to subsidize currently those whose parents had low incomesat the time the student was in the university. Those who advocate governmentally-subsidized income
contingent loans frequently claim that it makes greater sense to spend scarce tax dollars to subsidize
those whose higher education, for whatever reason, has not paid off monetarily, than to provide a streamof repayment subsidies to students merely because their parents were poor when they were students andhad to borrow ― but who may later earn good incomes.
A student loan scheme can also combine features of the conventional ﬁxed schedule and the income
contingent obligations. Such a scheme would feature an underlying, or default, obligation with afixed schedule of payments that would be due unless the monthly or annual repayments exceededsome maximum percentage of monthly or annual earnings̶in which event the obligation would notexceed that maximum percentage. Amounts owed on the original ﬁxed schedule of repayments would
be deferred and become due only at such a time as the earnings or income rose and the repayment
obligation could once again be made within the maximum percent of income limit. In such a scheme,
most borrowers would simply repay according to the original ﬁxed schedule (which might be graduatedupwards over time to correspond with anticipated earnings growth, but still on a fixed schedule ofrepayments). Some borrowers, particularly those experiencing a year or perhaps two or three of low
income due to unemployment, would pay income contingently during these years, but return to the
fixed schedule of repayment obligations when they regained their employment and their earnings.
These borrowers would have been granted the convenience of automatic deferment of payments̶
similar to a reﬁnancing̶but not a subsidy, as such. A few borrowers who combined prolonged periodsof unemployment or a low paying job with high initial indebtedness might never get back on the ﬁxed
schedule. They would continue to repay their student loans on an income contingent basis, reaching theend of the original underlying repayment period with remaining indebtedness̶which at some point
would be forgiven as though the entire student loan obligation had been income contingent from the
beginning. Variations of such a hybrid scheme are described in Usher (2005) and can be found in the US,
Canada, the Netherlands, and Germany
The income contingent form of student loan has been aggressively popularized, especially by Australia
and more recently by the authors of the several UK variants. In its most attractively packaged form,
such as in Australia, it includes an income contingent repayment obligation with an obligation on thepart of employers to collect the repayments, generally along with the withholding of income taxes andpension contributions at the time of wage or salary payment. While such an arrangement may lower thecosts of collection and the level of defaults and may be preferable to borrowers, who may not notice thedegree to which the student loan repayments are diminishing their take-home pay, such an arrangement
has nothing to do with whether the underlying repayment obligation is on the basis of a ﬁxed scheduleor payments or on the basis of a percent of income or earnings. In other words, any loan scheme (or for26

that matter any payment obligation that the government deems especially important and worthy of being
attached to the formidable governmental machinery of income tax withholding or pension contributions)can be granted such a collection advantage by the government.
While there are some real advantages to income contingency, especially for borrowers who areparticularly alarmed at the prospect of a repayment burden that might become “ unmanageable and mighteven decline to borrow in any other form, income contingency is also frequently oversold as though
it is less costly than a ﬁxed schedule obligation for virtually all borrowers (which it is not) or that it isfundamentally unlike a student loan (and for most borrowers it is fundamentally just like a conventional,or mortgage type, loan).
The Japanese Ministry is reported to be interested in an income contingent loan program, perhaps
modeled on the Australian scheme. While such a revised loan plan could almost certainly work̶andwhile the Japanese income tax and pension contribution machinery are reported to be highly effective̶
the conversion to an income contingent system would need to address several potential complications,such as how income or earnings are to be defined, the complications of marriage and one spouseleaving the labor market, the complications of living and earning income abroad, and the complicationsof incomes that are highly variable, typically unreported, and able to be split between borrower andnon-borrower members of a household. Other countries have resolved these issues, and so can Japan.
However, policy makers contemplating the income contingent form, or a conversion from conventional
to income contingent loans, must be careful to differentiate between the genuine advantages of income
contingency and those features of income contingency that too frequently invite a political obfuscationof the fact that an income contingent loan is still a loan that will be repaid by most borrowers at the same
real cost as the alternative conventional loan. Policy makers must also be careful to differentiate between
the attributes (and the liabilities) of income contingency itself, as opposed to some of the features
merely̶and generally incorrectly̶associated with income contingency (such as the mandatory

deduction of amounts owed at the point of wage or salary payment).16
In conclusion, as in all features of student borrowing and lending, the important steps are an agreementon the purposes of the scheme or schemes, an understanding of cost trajectories far into the future, anunderstanding of public budget constraints, including those that are future obligations (with present values),
and an appreciation of the politics and ideologies that inevitable surround higher educational cost-sharing.
16 See Educational Policy Institute (Alex Usher), Understanding International Debt Management/Repayment Programs andtheir Effect on the Repayment of Student Financial Assistance, Toronto, Educational Policy Institute, 2005 [http://educationalpolicy.org/], D. Bruce Johnstone, “Cost-Sharing and Equity in Higher Education: Implications of Income Contingent Loans”
in Pedro Teixteira, Ben Jongbloed, David Dill, and Alberto Amaral, Eds., Markets in Higher Education. Dordrecht, the Netherlands: Kluwer Academic Publishers, 2004, pp. 37-60; and “Higher Education Accessibility and ﬁnancial Viability: the Roleof Student Loans,” in Tres, Jaoquim and Francisco Lopez Segrera, Eds., Higher Education in the World 2006: The Financingof Universities. Barcelona: Global University Network for Innovation (GUNI) published by Palgrave Macmillan, 2005, pp.
84-101 [http://www.gse.buffalo.edu/org/IntHigherEdFinance/]27

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Callender, Claire (2003). Attitudes to debt: School leavers and further education students' attitudes todebt and their impact on participation in higher education. London: Universities UK.
Chapman, Bruce. ( 2006 ) . Government Managing Risk: Income Contingent Loans for Social andEconomic Progress. London: Routledge.
Chapman, Bruce and Chris Ryan (2002) “ Income Contingent Financing of Student Charges for Higher
Education: Assessing the Australian Innovation ” in Maureen Woodhall, ed. Paying for Learning:
The Debate on Student Fees, Grants and Loans in International Perspective. Special International
Issue of The Welsh Journal of Education, Vol.11, No. 1, 2002, pp. 64-81.
Johnstone, D. Bruce (2006a) Financing Higher Education: Cost-sharing in International Perspective.
Boston: Boston College Center for International Higher Education; and Rotterdam: Sense
Publishers, 2006.
――― (2006b) “ Cost-Sharing and the Cost-Effectiveness of Grants and Loan Subsidies to Higher
Education ” in Teixeira, Pedro, Bruce Johnstone, Maria Joao Rosa and Hans Vossensteyn, Eds.
(2006) Cost-Sharing and Accessibility in Western Higher Education: A Fairer Deal? Dordrecht The
Netherlands: Springer.
――― (2006c) “ Higher Education Accessibility and financial Viability: the Role of Student Loans, ”
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Financing of Universities. Barcelona: Global University Network for Innovation (GUNI) published
by Palgrave Macmillan, 2005, pp. 84-101.
――― (2004a) “ Cost-Sharing and Equity in Higher Education: Implications of Income Contingent
Loans ” in Pedro Teixeira, Ben Jongbloed, David Dill, and Alberto Amaral, Eds., Markets in Higher
Education. Dordrecht, the Netherlands: Kluwer Academic Publishers, 2004, pp. 37-60.
――― (2004b) “ The Economics and Politics of Cost Sharing in Higher Education: Comparative
Perspectives, ” Economics of Education Review. 20:4, pp.403-410, 2004.
――― ( 2002 ) “ Challenges of Financial Austerity: Imperatives and Limitations of Revenue
Diversiﬁcation in Higher Education ” in Maureen Woodhall, ed. Paying for Learning: The Debate
on Student Fees, Grants and Loans in International Perspective. Special International Issue of The
Welsh Journal of Education, Vol.11, No. 1, 2002, pp. 18-36.
――― (1986) Sharing the Costs of Higher Education: Student Financial Assistance in the United
Kingdom, the Federal Republic of Germany, France, Sweden, and the United States. New York:
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Available at <http://www.gse.buffalo.edu/org/IntHigherEdFinance>.

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Kirshstein, Rita J., Andrea R. Berger, Elana Benatar, and David Rhodes (20004) Workforce Contingent
Financial Aid: How States Link Financial Aid to Employment. American Institutes for Research.
Indianapolis: Lumina Foundation for Education.
Marcucci, Pamela N. and D. Bruce Johnstone (2007 [forthcoming]) “ Tuition Policies in a Comparative
Perspective: Theoretical and Political Rationales. ” Journal of Higher Education Policy andManagement, Volume 28,Issue 3, 2006.
OECD/IMHE/HEFCE Project on Financial Management and Govern4ence of Higher Education
Institutions (2004) On the Edge: Securing a Sustainable Future for Higher Education. Paris:
Organization for Economic Cooperation and Development.
Shibata, Masayuki, “ Student Financial Aid Policy in Japan. ” Paper prepared for the International
symposium, Worldwide Perspectives of Financial Assistance Policies, December 6-7, Tokyo, 2006.
Tekleselassie, Abebayehu and D. Bruce Johnstone (2005 “ Means Testing: The Dilemma of subsidy
Targeting in African Higher Education, ” Journal of higher /Education in Africa.
Teixeira, Pedro, Bruce Johnstone, Maria Joao Rosa and Hans Vossensteyn, Eds. (2006) Cost-Sharing andAccessibility in Western Higher Education: A Fairer Deal? Dordrecht The Netherlands: Springer.
Times Higher Education Supplement (2005) World University Rankings, October 2005.
Tres, Jaoquim and Francisco Lopez Segrera, Eds. (2005) Higher Education in the World 2006: The
Financing of Universities. Barcelona: Global University Network for Innovation (GUNI) published
by Palgrave Macmillan.
Usher, Alex (2005a) Much Ado About a Very Small Idea. Toronto: Educational Policy Institute.
――― (2005b) “ Understanding International Debt Management/Repayment Programs and their Effecton the Repayment of Student Financial; Assistance. ” Toronto: Educational Policy Institute.
Vossensteyn, Hans (2004) Portability of student Support: An Inventory of 21 Countries. Enschede, theNetherlands: Center for Higher Educational Policy Studies.
Woodhall, Maureen, ed. (2002) Paying for Learning: The Debate on Student Fees, Grants and Loans inInternational Perspective. Special International Issue of The Welsh Journal of Education, Vol.11,
No. 1.
Yonezawa, Akiyoshi and Reiko Kosugi 2006) “ Education, Training and Human Resources: Meeting Skill
Requirements ” in Shibata, Tsuyomu, Ed., Japan: Moving Toward a More Advanced Knowledge
Economy. Washington DC: World Bank Institute.
Ziderman, Adrian (2004) Policy Options for Student Loan Schemes: Lessons from Five Asian Case
Studies. Bangkok: UNESCO Bangkok; and Paris: International Institute for Educational Planning.
―――. (2002) “ Alternative Objectives of National Student Loan Schemes in Maureen Woodhall, ed.
Paying for Learning: The Debate on Student Fees, Grants and Loans in International Perspective.
Special International Issue of The Welsh Journal of Education, Vol.11, No. 1, pp. 37-47.

29

3. Student Financial Aid Policy in Japan
Masayuki SHIBATA1
Executive Director, Centre for National University Finance and Management, Japan

1. Trend of Tuition fees in Japanese Universities
The financial difference existing between private and national universities in Japan is related to
how their functions vary within the higher education system. While private universities have been
responsible for the expansion and the massiﬁcation of Japanese higher education, national universities
have played important roles in sustaining relatively capital-intensive educational areas, graduate
education and academic research.2 As a result, national universities have been heavily dependent on
government funding, and private universities on tuition fees.
However, until 30 years ago, the tuition fees of private universities were only modestly high while
those of national universities were held low. It was the policy of the government to guarantee for gifted
students the opportunity to access to higher education by holding down the tuition fees of national
universities, which were geographically distributed evenly across the Japanese regions and prefectures.
This was an indirect measure to deter private universities from raising their tuition fees in fear of losing
students. However, this policy was abandoned in 1972 in face of increasing pressure from interest group
including management of private universities and politicians as the private sector had suffered from
difﬁculties in ﬁnancing the expansion of their capacity. The tuition of national universities was tripledfrom 12,000 yen to 36,000yen in 1972. Since then, the tuition fees of national universities have been
gradually and constantly raised, and there existed a certain inﬂuential political argument that the gap in
the tuition fees between the national (and public) and private universities should be narrowed. The raiseof tuition fees of national universities, in turn, invited the corresponding action in private sector. Thus aspiral of tuition fees ʼ raise was formed.
This trend was accelerated by the pressure from the deteriorating government financial conditions
rooted in the “ oil shock ” and following the depression, and recently the lingering slump after the burstof bubble economy. As illustrated in Figure 1, the difference in the tuition fees between the national
and private universities was narrowed from 5.1 times in 1975 to 1.6 times in 2005. This resulted in thecurrent situation being characterized as “ High Tuition and Low Financial Assistance, ” which imposes a

1
2

The opinion expressed in this article is solely personal, and does not represent the organization to which the author belongs.
Asonuma, Akihisa, 2002, “Finance reform in Japanese higher education” Higher Education, Vol. 43, Kluwer Academic Publishers, p111.

31

heavy burden on the parents of students. (Kobayashi, 2002)3
Figure 1: Trends in the Tuition Fees of National and Private Universities

Table 1: Tuition and Entrance Fees of National and Private Universities in 2006
National

PrivateTuition Fees

¥535,800 ($4,579)¥830,583 ($7,099)

Entrance Fee (First year only)¥282,000 ($2,410)¥280,033 ($2,393)

Total¥817,800 ($6,990)¥1,110,616 ($9,492)

While private universities have, at least in theory, had liberty to set forth their tuition fees, national
universities have been under strict control by the government. Even after incorporation of national
universities in 2004, the government stipulates the standard amount and range, currently 10%, within
which each university will set its own amount. In 2006, 81 national universities out of 87 set tuition feesat the standard amount, ¥535,800 ($4,580). Other six universities adopted even less amount than thestandard. There is still a strong argument behind this that national universities are a major instrument forequal opportunity for higher education, though the gap in tuition fees between national and private has
been steadily narrowed.
Full or partial remission of tuition fees is granted on the meritocracy and need basis in both national
and private universities. National universities give up around 8% of tuition revenue for the remission.
Much less students in private universities enjoy the remission.

3

Kobayashi, Masayuki. 2002. “High Tuition and Low Scholarships (in Japanese)” College Management, Vol.116, pp 25-29.

32

2. The Legal Framework of Student Financial Aid
The equal opportunity in education is declared in the Japanese Constitution. The Fundamental Law
of Education stipulates that the state and local governments should implement financial assistance toeliminate ﬁnancial obstacles in receiving education.
The Constitution of Japan
Article 26
All people shall have the right to receive an equal education correspondent to their ability, as
provided by law.
The Fundamental Law of Education
Article 3 Equal Opportunity of Education
The people shall all be given equal opportunities of receiving education according to their ability,
and they shall not be subject to educational discrimination on account of race, creed, sex, social status,
economic position, or family origin. The state and local public corporations shall take measures togive ﬁnancial assistance to those who have, in spite of their ability, difﬁculty in receiving educationfor economic reasons.

3. The Current Situation of Student Financial Aid(1)

Outlines of Scholarship Loan and Scholarship Programs in Japan

The providers of scholarship loan and grant programs in Japan can be categorized primarily into
three types of organizations. The Japan Student Services Organization (JASSO), an independentadministrative agency, plays the foremost role. Second, local governments, universities and publicservice corporations account for a relatively small share of the total number of loaners and scholarshipaward recipients and of the total budgets and expenditures. Finally, private ﬁnancial institutions may be
regarded as a lender, although their loans do not assume the character of a scholarship. (Table 2)
Table 2 : Student Aid in Japan
Total Spending

Numbers of Recipients(1,000)JASSO (2004)¥660 billion($62 billion)

930

Local Governments Universities &Colleges Public Interest Corporations(2003)¥47 billion($4.5 billion)

250

National Life Finance Corporation(2004)¥240 billion($22 billion)

190

33

JASSO was established in 2004 as a non-ministerial government agency under the jurisdiction of
the Ministry of Education, Culture, Sports, Science and Technology. It was instituted from the merger
between the Japan Scholarship Foundation and four other non-profit foundations that administrated
various support programs for international students. JASSO is currently the only agency that operates
nationwide public “ scholarship loan ” programs in Japan. The number of student recipients reached 930
thousand in higher education, and the amount of loans exceeded 660 billion yen (6.2 billion US dollars)in 2004.
The programs provided by the local governments, universities, and public interest corporations
include both types of loans and grants. Although a fairly large number of students̶approximately 250
thousand̶were supported by these programs in 2003, the total amount of these financial assistanceprograms was only 47 billion yen (450 million US dollars). Therefore, it could be said that the averageamount of this type of financial assistance programs awarded to students is generally rather low.
Notably, however, out of the total amount of assistance provided, only 18.6 billion yen (0.2 billion
US dollars) was supplied by the universities and colleges themselves. The most stringent screening
standards and processes are imposed upon applicants. Thus, the number of awards is strictly limited toonly a small number of students who exhibit outstanding academic achievement or promising ability intheir particular ﬁeld. This feature exhibits a striking contrast to the many renowned private universities
in the United States that can afford to award their students large scholarships from the large amount ofendowment funds they receive.
Finally, the actual circumstances under which the loans for education are serviced by private ﬁnancial
institutions are scarcely known. The exception to this is the National Life Finance Corporation (NLFC),
which discloses the detailed information regarding its lending since it was established as a governmental
agency by a law passed in 1949. The resource for the loans is secured through borrowings mainly
from the government ʼs Fiscal Investment and Loan Program and the agency ʼs own bonds. In 2004,
approximately 190 thousand loans̶totaling 240 billion yen (2.2 billion US dollars)̶were borrowed by
the parents of students graduating from high school and entering a university. The maximum amountof a loan is 2 million yen (17 thousand US dollars). These loans are distinct from the “ scholarship
loan ” provided by JASSO since NLFC ʼs loans are borrowed by parents, not by students. The Japanese
government recently formulated a sweeping reform plan for governmental agencies providing ﬁnancial
services. This reform plan prescribed that the NLFC ʼs educational loan program be reduced in scale inconsideration of the fact that the expansion of JASSO ʼs ﬁnancial assistance programs has been assuming
its roles and objectives of the former.
In the following sections, the details of the “ scholarship loan ” program of JASSO will be elucidated.

34

(2)

Scholarship Loan Programs of the Japan Student Services Organization

JASSO provides two types of loans: interest-free loan and low-interest loans.
The Interest-free Loans
When students apply to the program for financial aid, a set of criteria on household income andscholastic achievement is employed to assess the student ʼs eligibility to be awarded the interest-freeloans. For example, a university freshman is required to have demonstrated scholastic achievement
by securing a grade point average (GPA) of 3.5 or higher on a 5.0 GPA scale in the senior year in highschool in order to be approved for the interest-free loan. The student ʼs household income must be
9.96 million yen (85 thousand US dollars) or less in the case of a family of four members, regardlessof whether the student intends to attend a public or private university. The statistics indicate thatapproximately 60% of the recipients come from families with a household income of 5 million yen (47thousand US dollars) or less. The procurement of funds for this type of ﬁnancial assistance loan entails(1) the inﬂow of ﬁnance from the government at zero interest and (2) allocation from redemption madeby ex-recipients. Therefore, the nature of this interest-free loan program, which eventually offsets theactual interest by the hidden government subsidy, is a mixture of meritocracy and need basis that aims toprovide an educational opportunity for able students in accordance with certain national interests.
Table 3: The Scholarship Loan Programs of JASSOInterest-free Loan
Monthly AmountLow-interest Loan

¥30,000,( Attending private university/¥50,000,
college, living away from home)¥80,000, or¥64,000 ($550)¥100,000 ($860)

3.5 or higher on a 5.0 GPA scale
Conditions¥9,960 thousand or less
GPA Household income ($85 thousand)Interest-free loan from the governFunds
ment
Credited repayments

Well-motivated¥13,420 thousand or less($115 thousand)Fiscal Investment and Loans fundAgency ʼs bonds
Credited repayment

Total Spending (2006)

460 thousand recipients¥272 billion($2.3 billion)

630 thousand recipients¥528 billion($4.5 billion)

RepaymentMonthly installment over 20 years

Monthly installment over 20 years

The Low-interest Loans
On the other hand, the low-interest loan program entails mild criteria with respect to both householdincome and scholastic achievement. In fact, those who wish to secure low-interest loans are rarely
unable to clear the assessment. This indicates that the low-interest loan program is designed to meet theﬁnancial needs of students, rather than be based upon the meritocracy. Although the ratio of the number35

of recipients to the total number of undergraduate students in 2004 was only 15%, the demand for lowinterest loans was almost completely satisfied under the present scheme. The funds for low-interest
loans are financed through the Fiscal Investment and Loans fund, the agency ʼs bonds, and credited
repayments. The interest rate on the loans is based on the weighted average of both the interest rates of
the government ʼs Fiscal Investment and Loan Program fund and the agency ʼs own bonds. This interest
rate is capped at 3%. The agency ʼs bonds have no government guarantee. In the event that the weighted
average interest rate exceeds 3%, government subsidy is to be injected. During the prolonged period
of depression after the burst of the bubble economy in the 1990s and the ﬁrst few years of the twentyﬁrst century, since an easy money policy was adopted, the weighted average of the interest rate has been
maintained less than 3% since 1997. Moreover, the government provides subsidies in order to exempt
students from interest accrued during their period of attendance at universities and colleges. Recently,
an emerging issue that has been reported is that the Ministry of Finance is considering discarding the
3% cap in order to prepare the forthcoming period of higher interest rates than it, because the Japanese
economy is expected to recover.
In principle, monthly repayments are automatically deducted from the recipient ʼs bank account after
graduation with a 6-month grace period. In the case of low-interest loans, the total amount of principal
and interest is divided by the number of installments within a 20-year period.
As shown in Table 4, it is evident that the monthly amounts of interest-free loan for undergraduate
students are far from sufﬁcient to meet all the expenses, including the tuition fees. Meanwhile, students
in the low-interest-rate program may choose one of the monthly amounts of financial assistanceaccording to their needs and preferences. The highest amount of this type of loan is expected to cover
approximately 50%–70% throughout the average monthly expense of students. Although the recipientsof interest-free loans are able to receive low-interest loans at the same time, only 1% of them in fact
opt for the both. This may be an indication of the fearful attitude of students, especially from the lower
income stratum, toward amassing ﬁnancial debts.
If it is indeed the case that one of the objectives of a student loan is to provide and promote theopportunity to equal access higher education, it can be reasonably assumed that its purpose cannot be
entirely fulﬁlled unless the approval of such a loan is to be made prior to the student ʼ s entrance at auniversity. Thus, this so-called “ prior acceptance ” selection for ﬁnancial aid is essential in this regard
compared with the nature and the magnitude of the impact of “ post acceptance ” selection, which isapplicable to those who are already attending at a university. Currently, around 40% of recipients at
the undergraduate level and approximately 80% at the graduate level are entitled to their ﬁnancial aid
through “ prior acceptance. ”

36Table 4: Interest-free Loan Program of JASSO
T h e m o n t h l y l o a n The estimated averamount to be paid to age monthly expenses
recipients [A]of students [B]Undergraduate

Graduate

Attending a national
university/college, living
away from home
Attending a private institution, living Away fromhome
Master ʼs
Doctor ʼs[A]/[B]¥51,000 ($436)¥151,000 ($1,291)

34%¥64,000 ($547)¥208,000 ($1,778)

31%¥88,000 ($752)¥148,000 ($1,265)

59%¥122,000 ($1,043)¥175,000 ($1,496)

70%

Source: “ Student Expenses in 2004, ” JASSO.
Note: Monthly expenses [B] include tuition fees.
Table 5: Low-interest Loan Program of JASSO
The loan monthly amount to be
paid to the recipients [A]The estimated average monthly
expenses of students [B]Undergraduate[Options]¥30,000¥50,000¥80,000¥100,000 ($855)¥151,000 ($1,291)[National, away from home]66%(at maximum)

Graduate[Options]¥50,000¥80,000¥100,000¥130,000 ($1,111)¥148,000 ($1,265)88%(at maximum)[A]/[B]The criterion of household income for graduate school students is accorded considerably lower
priority, since the income of the individual student ( and his/her spouse ) is seriously taken into
consideration. For example, the income of a Master ʼs level student should be 4,160 thousand yen (40thousand US dollars) or less in order to be entitled for an interest-free loan. The ratio of the recipients tothe total number of graduate students is much higher than to that of undergraduate recipients; this is dueto the strong demands for a knowledgeable and high-skilled work forces and the intensive training loadrequired being researchers and/or highly professional experts.
Since the beginning of the period of high economic growth around 1960, a unique scheme of interestfree loan had been in operation until 1984.4 This special scheme was designed to ensure that exceptional
students would not miss an educational opportunity and thereby meet the demand for a well-educatedwork force. The candidates selected through tests or interviews were promised an exemption from
4

Japan Student Services Organization, 2006 “The History of Japan Scholarship Foundation”, (in Japanese), pp118-134.

37

the repayment of a certain proportion of the total loan prior to their entry into a university or graduate
school. In this manner, the selected students could eventually receive the type of ﬁnancial assistance,
which had a stronger characteristic of scholarship grants rather than a loan. However, this scheme was
gradually scaled back due to the government ʼs austere ﬁnancial policy over two decades and was ﬁnallyabolished in 1984.
Another exemption scheme was introduced in the early 1950s in order to feed the inﬂux of the scarce
highly-educated and knowledgeable human resources into speciﬁc professions, such as those of school
teachers and university professors. This scheme had also been reduced over five decades and was
ﬁnally converted into a new program in 2004. In the new program, the top one-third of the graduate
students who completed graduate courses with financial assistance from JASSO ʼs interest-free loans
are recommended by their universities to the organization to be eligible for full or half exemption of
repayment.
Besides the “ scholarship loan, ” the Japan Society for the Promotion of Science provides fellowships
to doctoral students with a view to support the activities and lives of young researchers. Currently
approximately 1,000 doctoral students receive monthly stipends and scientiﬁc research grants.

4. Issues regarding the Scholarship Loan Programs of JASSO(1)The Low Ratio of the Recipients to the Total Number of Students

Table 6 presents the rate of the recipients of scholarship loans to the total number of students in 2004.
Figure 2 illustrates that the rate for undergraduate students remained at approximately 10% throughout
the expansion period of higher education in the 1990s, while that for graduate students fluctuated at amuch higher level.
Table 6: Take-up Rate of Scholarship Loans
Total Number ofStudents (A)Undergraduate
Take-up Rate
Spending

Graduate
Take-up Rate
Spending

2,732 thousand

203 thousand

Interest-free (B)
229 thousand
A/B
8.4%

Low-interest (C)Total (B+C)¥138 billion($1.3 billion)

407 thousand
C/A
14.9%
¥318 billion($3 billion)

636 thousand(B+C)/A
23.3%¥456 billion($43 billion)

59 thousand
A/B
29.1%
¥67.6 billion($6 billion)

21 thousand
C/A
10.4%
¥21.6 billion($2 billion)

80 thousand(B+C)/A
39.5%¥89.2 billion($8 billion)

38

Figure 2: Trend of Take-up Ratio of Scholarship Loans

Figure 3 illustrates that the trends of the number of total recipients and the percentages of students
pursuing higher education exhibited a similar pattern for more than 40 years. Although the number ofrecipients had increased steadily over the period, the ratio remained stable at approximately 10% as thesize of undergraduate education expanded rapidly.
Figure 3: The Trends of the Numbers of Recipients and the Advancement Rate pursuing Higher
Education

The 1990s were marked by a lingering depression in the wake of the bust of the bubble economy.
At the same time, Japanese higher education experienced another rise in the advancement rate. Many
private institutions were newly established since the Education Ministry relaxed the standards for the39

establishment of universities and colleges as an adoption of the so-called “ new liberalism. ”5 Thus, thedemand for ﬁnancial assistance was increasing in Japan. At the turn of the century, the government ʼs
Fiscal Investment and Loan scheme was cited for serious concerns and scrutiny under a widespread
suspicion that the fund may have unnecessarily expanded and turned into a wasteful investment forbuilding social infrastructure, including rarely used motorways.
This led to drastic reforms of the Fiscal Loan scheme. Although education as well as health andwelfare services were proposed as promising ﬁelds for fruitful investment in society, investment in theseﬁelds began to be placed under strict control, management, and assessment. Another reform served toreduce the size of the fund by substituting it with the agency ʼs bonds. Accordingly, JASSO initiated theissuance of the agency ʼs bonds in 2001.
Against the backdrop of the factors described above, a substantial expansion of the low-interest loan
was undertaken by relaxing the assessment criteria, while the size of the interest-free loan was left
unchanged due to ﬁnancial difﬁculties. Due to the expansion of the low-interest loan, the number of total
recipients of the loans in 2004 grew to a level 1.6 times that in 1998. (Figure 4)
Figure 4: Number of Recipients of Scholarship Loans (Undergraduates)

As a result, the ratio of the recipients to the total number of undergraduate students rose to 23% by
2004. However, it is still considerably low compared to ﬁgures such as 80% in England and 70% in theUSA, for both loans and scholarship grants. It should be noted that the demand for low-interest loans
has almost been almost satisfied, while interest-free loans attract 30%–40% more applicants than thebudgeted number of recipients. At this point, we have to address some fundamental questions. Why has
the discontent of students and parents not erupted for a long time? Why has the demand for low-interest
5 For a historical background, see pp13-15 of “Financial Management and Governance in HEIS: Japan,” OECD IMHE-HEFCE
Project on International Comparative Higher Education, 2004.

40

loans almost been satisﬁed?
If the current situation of high tuition fees is taken into perspective as described earlier, thesequestions become magniﬁed.
Why have the Japanese parents endured such a heavy ﬁnancial burden over a few decades? Kaneko(2005)6 and Yano (1997)7 provide an answer to this question. In Japan, higher education used to be
regarded as the key to entering the urban middle class. Thus, people̶including both parents andstudents̶used to have ﬁrm aspiration for pursuing higher education, which used to be affordable evenfor the lower income stratum at a time when the beneﬁts of the rapid economic growth were distributed
equally among the social classes. In addition, as Japanese parents and their children share close-knit
relationships, the parents used to assume a strong sense of responsibility for overcoming financial
difﬁculties in order that they could send their children to schools and universities. This may be reﬂectedin the cultural norm of parents and their psychological tendency to avoid having their children depend
on interest-bearing loans. This could be one of the most persuasive reasons why the demand for theavailable low-interest loans seems almost satisﬁed; in fact, the take-up ratio of the loans is less than 20%.
However, another question should be raised: Can we let the situation remain unchanged in the near
future? There is a strong concern that it will become increasingly difficult for parents to continue
investing in their children ʼs higher education as they have to bear far greater costs for their own
retirement (pension), medical services, and senior care services. Japan has rapidly turned into an aging
society with the declining birth rate. Moreover, it is noted that the income gap between the rich andthe poor has been widening due to the prolonged depression and the increase in the number of parttime and short-time employees. Against these backgrounds, the scholarship loan program needs to bereviewed in order that some portion of the burden can be shifted from parents, who are forced to prepare
for their own old age, onto their children. In other words, the take-up ratio of the ﬁnancial assistanceprogram should naturally increase. From the view-point of borrowers, an expansion of the interest-freeloans program is the most desirable scenario. Under the prevailing unfavorable ﬁnancial conditions, it
is rather evident that this policy cannot be easily realized because increasing the invisible costs, that is,
subsidizing the interests of such loans, will place an enormous ﬁnancial burden on the government ʼsﬁscal conditions.
Perhaps, it would be probably practically better if it were possible for us to improve the current low6 Kaneko, Motohisa. 2005. “Next Issues in Higher Education: Scholarships and Tuition (in Japanese).” IDE, October, 2005.
7 Yano, Masakazu. 1997. “Social Economics of Scholarships (in Japanese).”Students and Universities, Vol.388. Ministry of Education, Science, Sports and Culture

41interest loan program. Or, if possible, the introduction of the income-contingent repayment scheme
could be an alternative method of reducing the sense of burden among users by replacing the current
mortgage-loan type repayment. This is because this type of repayment is front-loaded and imposes aheavier burden in the earlier years of the graduates ʼ career. Moreover, an income-contingent repayment
plan may help relieve the anxiety toward the debts.
(2)

Necessity of a Scholarship Program as a Mechanism to Maintain Social Mobility between
Classes

As explained earlier, all of JASSO ʼs programs have been generated in the loan scheme from the
beginning. When the Japan Scholarship Foundation̶the predecessor of JASSO̶was established in
1943, two years before the end of World War II, statesmen reasoned that the excessive state expenses
should be avoided and that the responsibility of educating children lies with the parents.
While the underlying principle has never changed, some modiﬁcations were made during the 1960s
when Japan ʼs economy began to exhibit signs of rapid growth upon the recovery from the post-war
chaos. As the strong demand for a well-educated work force began to be voiced in the industrial world,a special loan program was introduced to implement a scholarship factor into the loan scheme. As
explained earlier, those students who were selected through tests or interviews were promised a special
loan that would exempt them from a considerable portion of repayment. However, this special loan
program had diminished after the “ oil shock ” and the ensuring ﬁnancial difﬁculties. The program waseventually completely abandoned in 1984.
There are some precedent research results that indicate that the lower the household income is, thegreater is the tendency of such families to avoid debt or harbor fear toward it in foreign countries.8 As
some argue, it is more likely that as the income gap between the social classes widens, students from thelower income families will forfeit the opportunity to pursue higher education. This is known as the issueof imperfect information in the ﬁeld of economics. Educational investment may be regarded as risky
especially when people do not have the knowledge and information about future beneﬁts and rewards
to be gained from the acquisition of higher education. People belonging to lower income families
have greater tendencies of being trapped in their conditions because they lack the personal or familial
experience of the higher education, and thus, they in negatively assess advancement to colleges anduniversities in order to avoid debts. If an undergraduate student borrows a maximum monthly amountof 100 thousand yen (860 US dollars) for 4 years, the total amount of repayment is 6.5 million yen (60thousand US dollars) including the interest incurred during the period. Therefore, it is reasonable to8

Callender, Claire, 2005, “ Survey of higher education studentsʼ attitudes to debt and term-time working and their impact on
attainment, DfES, pp.38-44.

42

conclude that even an ordinary salaried worker would hesitate to borrow an amount as much as this.
The best remedial measure to tackle this issue is to introduce a scholarship program speciﬁcally geared
toward lower income families. Certainly, the scholarship program is expensive, however it may be aworthwhile social project for us to implement it along with other social programs with some expense,
because it is necessary to maintain and secure the mechanism that promotes social mobility between
classes.
(3)

Default

JASSO ʼs loan programs have adopted the mortgage-loan type9 repayment. The repayment should becompleted within 20 years with monthly installments made automatically by credit transfer. Although allrecipients are required to open an account at a bank and report their account information to JASSO prior
to their graduation, in order to prepare for their repayment schedule, around 5% of the new graduates
somehow fail to register their account number in the JASSO ʼs system. The default rate on the monetarybasis is approximately 8% among new graduates. This default rate has been maintained at the same levelin recent years. Nevertheless, the arrearages accumulate over the years. In particular, since 1999 when
the low-interest loan program began expanding, the arrearage accumulation has accelerated in termsof the real amount. The longer the period of delinquency, the worse is the recovery rate. Even though
the default rate of the new graduates remains the same, the issue attracts more attention and criticism
because the total amount of the default increases. This problem has become serious enough to bereported in the papers and very rapidly grow out of control. This would undermine the sustainability ofthe scheme.
In 2004, the amount of accumulated default was 50.7 billion yen (0.5 billion US dollars), with 250
thousand borrowers in default. JASSO aims to collect repayments from half of the 250 thousand,as they are ones who have been in default for less than a year and are more willing to revert to theoriginal repayment schedule. The defaulters are contacted by telephone normally in the evening and on
holidays from the beginning of the default up to the sixth month. After the sixth month of the default,
an announcement is made declaring that JASSO may present the delinquency case in court, in order topursue legal options for a procedure for execution. However, such legal action is very expensive, and it
is usually not worth the relatively small amount of delinquency. This is the reason why JASSO was notaggressive in implementing these steps, as compared with the cases in other countries, such as the UnitedStates.

9

As in case of buying a house, the loan has a ﬁxed duration, and monthly repayments are ﬁxed other than adjustment becauseof change in the interest rate.

43

Table 7: Repayment of Scholarship Loans

Total AmountAmount due in the year
¥187 billion($1.7 billion)

Amount overdue¥42.5 billion($0.4 billion)

Total¥229.6 billion($2.1 billion)¥172.9 billion($1.6 billion)
92.4%¥6.1 billion($60 million)
14.4%¥179 billion($1.7 billion)
77.9%

Collected
Collection Rate
Accumulated bad loans:¥50.7 billion ($0.5 billion)

The Number of borrowers in repayment: 1,730 thousand
The Number of borrowers in default:

250 thousand

In 2004, a new guarantee system was introduced in addition to the old one, which required students
to ﬁnd single or joint personal guarantors for their loan applications. Under the new system, if students
pay the premium to the associated credit guarantee agency with JASSO, they are no longer required
to present a co-signer in their application procedures. Students have the choice of using this option or
ﬁnding individual guarantors. The premium is automatically deducted from the monthly amount. Since
the deposit of the premium is to be applied to the defaulted debt, the take-up rate has to be high enoughin order for the system to be successful. The take-up ratio is currently around 30%, and additional efforts
are required to raise the rate.
There appears to be no crucial countermeasures to cope with the cases that fall into default. It is,however, important to ensure against “ moral hazard ” by strengthening the collection measures, including
public relations for betterment, and/or the possible usage of private credit collection agencies. In thelong term, a withholding system along with taxation, like that already introduced in Australia andEngland, may be an option.

5. Policy-making and Administration in Scholarship Loan Program(1)

Policy-making in the Scholarship Loan Program

As explained earlier, the main program in student financial assistance is administered by anindependent administrative institution, JASSO. Such an institution is given a middle-term plan that it
is supposed to achieve within five years. The Ministry of Education retains the jurisdiction over the
institution, controls its operation, and assesses its performance at the end of every ﬁscal year and the lastyear of the ﬁve-year period, in accordance with the objectives set for that year and the ﬁve years. The
administrative operation expenses of the institution are borne by the block grant from the government.
The middle-term objectives of JASSO do not stipulate the size of the scholarship loan programs.
Instead, it is decided in the process of drafting the government ʼs budget each year while taking into

44

consideration the demand for the loan programs and available funds. The government ʼs budget proposal
is drafted with coordination between the Ministry of Education and the Ministry of Finance. In thisprocess, designated Diet members from the ruling parties are consulted in advance in order to facilitate asmooth passage of the budget proposal.
The middle-term objectives of JASSO include items concerning measures to improve administrative
procedures of scholarship programs and the targeted collection rate or default rate.
Presently, the funds for the scholarship programs come from interest-free loans from the government,
the Fiscal Loan fund, the agency ʼs bonds, and credited repayments, as illustrated in the following ﬁgure.
Figure 5: Funds for Scholarship Loan

The government ʼs Fiscal Investment and Loan Program funds are controlled by the Finance
Ministry in both aspects of selling the government ʼs bonds and distributing available funds for eachgovernment function. The issuance of agency ʼs bonds is to be authorized by the Ministry of Educationin consultation with the Ministry of Finance. Therefore, these funds raised in the financial market
are also under the strict control of the government. From these illustrations, it can also be understoodthat the Finance Ministry has a strong influence in the decision-making of the size of scholarshipprograms. As the interest on loans is exempted while students stay in universities and the interest above
3% is subsidized by the government, the Ministry of Finance is deeply concerned with the size of the
programs.
The values of the agency ʼs bonds are to be determined by the credit rating of the competitive
commercial market, since they are not government guaranteed funds. In fact, there is a remarkabledifference in the interest rates between the commercial and government bonds. The difference is45

finally accounted for by graduates ʼ repayments. It is assumed that, to an extent, the competitivemarket mechanism is expected to play a signiﬁcant role as an instrument to shape the organization ʼs
management capability. This is because it would make it impossible to issue bonds if the agency ʼs poor
management produced bad debts. However, in reality, investors have already taken into account that thisindependent administrative agency is supported by the government, and therefore, there would be almost
no risk of bankruptcy. This is the reason why it is said that they acknowledge the “ tacit guarantee ”
by the government and are willing to purchase the bonds. As required by investors, the disclosure ofmanagerial information has progressed considerably. However, the tacit guarantee weakens the role ofthe market mechanism. It has to be examined whether it is economically rational to raise the funds ina more costly manner when an alternative fund, the namely Fiscal Investment and Loan Funds, is alsoavailable.
(2)

Administration of the Scholarship Loan Programs

One of the most important tasks in any scholarship loan scheme is collection. The government
mobilizes two measures to improve the performance of JASSO. One is the institutional assessments
done on a yearly basis and the other is conducted at the end of the five-year plan. As fears against
increasing the default rate increased and became widespread in society, the assessment became very
stringent, and thus, the organization is often urged to devise methods to improve its performance. For
example, it has been repeatedly recommended that JASSO outsource collection to private companies
with expertise in the ﬁeld on a contractual basis. The assessment conducted at the end of the middleterm reviews the necessity of the organization ʼs existence itself. This imposes an immense pressure on
the executive managers and all the employees.
Another source of pressure comes from the Ministry of Finance, which closely controls the Fiscal
Investment and Loan Funds, as they themselves could be a target of criticism if their investment turns out
to be inefﬁcient. They are concerned about the default rate to such an extent that detailed suggestions oncollection measures from the Ministry of Finance are often ordered from JASSO through the Ministry of
Education.
An effective method for an independent administrative institution would be to administer thescholarship loan programs, while major policy decisions such as the size and conditions of loans are
dictated by the government.
In addition, the assessment system forces JASSO to offer their best efforts to improving the current
default rate. It has to be emphasized that the issue of default is exacerbating with each passing year.
Therefore, a drastic measure should be considered in the long term.

46

Appendix Selection Procedure of Recipients of JASSO ʼs Scholarship Loans(In case of current students)
JASSO notifies each university of planned number of recipients calculated on the basis of①previous year ʼs record etc..
Applicants present relevant documents to university to prove his/her eligibility in household②

income.
University provides the applicant with ID number and password after confirming his/her③

eligibility in household income.
Applicants send on-line information to JASSO on his/her family structure, household income

④

etc..
JASSO compiles lists of applicants for each university. University downloads the lists and⑤

automatic selection program from JASSO ʼs host computer.
⑥ University feeds the selection program additional information such as scholastic achievements.
University decides weighting between household income and scholastic achievements in theselection. Finally, prioritized lists of applicants will be sent to JAASO for approval.
⑦

JASSO decides recipients for each university in accordance with the prioritized lists.

47

4. Equality and Cost Sharing in Japanese Higher
Education
Masayuki Kobayashi(Center for Research and Development of Higher Education The University of Tokyo)

1. IssuesThis chapter deals with the issues on the cost sharing and equality of higher educational opportunity
in Japan. I would like to discuss six issues. The ﬁrst issue is cost-sharing in Japanese higher education.
In Japan, the parental burden ranks the highest amongst the world. Should we, or can we maintain thismodel of ﬁnancing? Should we promote the shift of cost sharing from public to private, from parent to
student? It's a very big issue. If not, what policy is recommended or needed?
The second issue is a policy of the combination of tuition fees of universities and colleges and student
financial aid programs. The tuition fees of Japanese universities and colleges are very high, and wehave scare public grants for undergraduate students both in the public sector and private sector. On theother hand, public student loans, in particular loans of JASSO (Japan Student Services Organization),those are with no or a very low interest rate, have been increasing rapidly. Does it mean that a shift fromhigh tuition / low aid policy to high tuition / high aid policy, which is very popular in American private
universities and colleges? And how do we evaluate this issue? Related to this topic is, some councilsof the Japanese government, especially the Council on the Finance System of the Ministry of Finance,
argue that the tuition fees of national universities should be equal to those of private universities andcolleges. This “ equal footing ” argument has very strong support from some economists and educators.
What should we think of this argument? This is the second issue of this chapter.
And the third issue is the criteria of JASSO student loans. Student loans of JASSO have two criteria:
need-based and merit-based. These two criteria have not been changed since the Japan ScholarshipFoundation was established in 1944, which was reconstructed to JASSO in 2004. Should we keep thesetwo criteria or change them by creating a new type of student loan based on need only or merit only?
This is the third issue.
The fourth issue is the equality of higher educational opportunities. The Student Life Survey by
Ministry of Education, MEXT (by JASSO since 2004) shows there is not so much inequality of higher
education accessibility among income classes. However, as we show later in this chapter, there is muchinequality of educational opportunity in private university according to our new survey.
If the income inequality is widened, as is discussed recently, the accessibility of higher education for
low-income families may be shrinking because among low-income families widening loans might not49

be effective to decrease their ﬁnancial burden. We found the loan aversion among low-income families,
and this may affect the decision of student family to apply university. So this process might become avicious circle. What policy do we need to improve this disparity crisis? This is a very big issue both forresearchers and policy makers.
The fifth issue is the loan collection scheme. JASSO has a penalty system for non-repayments,
however it is argued this system has not been working well, and the default rate has been rising. Just
recently, JASSO started to strengthen its penalty system, and it might increase the loan aversion for
low-income families. What should we do to reconsider the loan borrowing and default problem? Will
implementing the income contingent loan repayment scheme improve this situation? If so, what kind ofincome contingent loan repayment scheme is desirable: hard, soft, or hybrid? There are so many income
contingent loan repayment schemes as Usher and Johnstone in this report mentioned. This is a ﬁfth issue
in this chapter.
And ﬁnal issue is the privatization of JASSO. Some councils of the Japanese government, especially
the Council on the Finance System of the Ministry of Finance and the Economic and Financial
Management Council under the prime minister, argue the privatization of JASSO, and private companies
such as commercial banks can operate student loans effectively and efficiently. Some activities suchas loan collection may or can be outsourced, but there are no student loan agencies that are entirely
privatized in other countries. JASSO has a 60-year history and it has a lot of infrastructure, for example,
a good database system of borrowers. What do we think of the privatization of JASSO? It's a very big
political issue in Japan.
Those are the topics we'd like to discuss further in this chapter. We will try to show the evidence tosupport our arguments.

2. Backgrounds of the Higher Education Reform
Before showing the student ﬁnancial assistance in Japan, we would like to point out factors affecting
the Japanese higher education, as follows.
1)

decreasing youth population,2)

stringent public ﬁnance,

3)

market-driven reform,

4)

a very low interest rate,

5)

small income differences,

6)

parental strong willingness to pay for their children's education.

We would like to explain the background factors briefly and then discuss the impacts to higher
education and student ﬁnancial assistant programs.

50Decreasing Youth Population
First of all, the decreasing 18 year-old population invokes urgent problems for higher education.
The youth population has been decreasing very rapidly as Figure 1 shows. This decrease has been
making university participant ratio increased since 1991. However, the actual numbers of the university
and college enrollments have been decreasing. This means that the selection of enrollment has been
becoming less selective. The level of selection of entrance examination has been falling. It also meansthat low achievers and/or new type of students who are not well prepared for university education andlack fundamental academic competencies and motivation can easily enroll in some universities andcolleges. These universities and colleges have to have new curricula and student assistance for these socalled involuntary students. Many students apply for university because of parental pressure, that is,parents are very eager for their children to go to university.
Figure 1 Trends of 18-year-old Population, University and College Enrollment Ratio
3,000,000

100%
90%

2,500,000

80%
70%

2,000,000

60%
1,500,000

50%
40%

1,000,000

30%
20%

500,000

0

0%

19
5
19 5
5
19 7
5
19 9
61
19
6
19 3
6
19 5
6
19 7
6
19 9
7
19 1
7
19 3
7
19 5
77
19
7
19 9
8
19 1
8
19 3
8
19 5
8
19 7
8
19 9
9
19 1
8
19 3
9
19 5
9
19 7
9
20 9
0
20 1
03
20
05

10%

year

University and college enrollments
University and college enrollments ratio

18-year-old population
University and college acceptant ratio

note: university and college enrollments ratio=university and college enrollments / 18-year old population

Stringent Public FinanceAt the end of ﬁscal year 2002, the Japanese accumulated public debt reached to seven hundred trillion
yen, which was 1.4 times of the Japanese GDP. Japanese government has been taking very shrinking
budget policy to improve the deﬁcit. But the Japanese society has a lot of problems such as decreasing
younger population, the aging society, and increasing social care and medical care. We have serious
dilemma between stringent ﬁnance and strong demands for public money.

51

Market-Driven Reform
The Japanese government took the market-driven reform of the government and public finance toimprove the ﬁnancial situation. This was called “ the structural reform with no sacred cows. ” The main
purpose of this policy is to deregulate strict rules those restrict the behavior of stakeholders such asuniversities and colleges, educational industry, and the governments themselves, while decreasing
subsidies. This policy has been having strong inﬂuence to the higher education.
Very Low Interest Rate
The Japanese government has been taking “ Zero interest monetary policy ” since the end of the
bubble economy in the 1980s. This policy makes the interest rate of JASSO Type II loan (the loan withinterests) very low. So the interest rate has not been serious political issue till now. This is very uniquecharacteristic of JASSO loans. But it is not certain that this low interest rate will continue in the future.
Small Income Difference
In Japan the wage difference between university graduates and high school graduates is much smaller
than those of other developed countries. This might be the result of high participation rate of higher
education in Japan. But this small income difference will affect the behavior of younger generation.
Some of them might choose not to go to college because they cannot gain more benefits from theireducation.
Parental Strong Willingness to Pay for their Children's Education
The last factor that is important to Japanese student assistant program is parental very strong willingto pay for their children's education. As is shown later in this chapter most parents, even low-income
parents have very strong wish to pay for their children's education. It may be a part of Japanese culture,
or of the East Asian culture because this willingness is observed among the parents in East Asian
countries.

3. Changing Higher Education and Student Financial Assistance
The higher education policy and student ﬁnancial assistant policy has been changing to respond thesechanges in Japanese social and economic situation. The change also has been affecting the behavior ofuniversities and colleges. We will overview them in turn.
3.1. Market-Driven Higher Education Policy
The Higher Education Policy has been changing very rapidly since 1991. Till 1991 the Ministry of
Education rigorously restricted the establishment of new universities and colleges, and even departments
since 1976. The Ministry also restricted places (the number of enrollments in each department in

52

a HEI). It changed this restricted policy to laissez-faire to establish new universities and collegesand departments, though the 18 year-old population begun to decrease since 1993. It argued that asuniversities and colleges have to compete each other to survive, and therefore this market-driven
policy would make quality of Japanese HEIs better. Each HEI was involved in the competition to get
students and money since then. This competition has been getting harder because the youth population isdecreasing. This competition began to affect their ﬁnance and student ﬁnancial aid policy.
On the other hand, while the government has been trying the market-driven reform, it has been cutting
the subsidies to national universities for more than two decades. As the result the public ﬁnancial cost
sharing in higher education is only 0.5 percent of the GDP, which is the lowest among OECD countries.
Each university and college has to ﬁnd the revenue from external resources and/ or raising the tuition
fees. They compete each other to ﬁnd resources and prospective students. The main resources are tuition
fees and external resources such as gifts, revenue from endowments and profits from their industrial
activities. This is a market-driven reform of higher education.
One of the important reforms of higher education in this decade is deregulation and stimulation ofcompetition among HEIs due to incorporation of National Universities and colleges.
3.2. Tuition Fees Policy
The stringent public ﬁnance has been affecting subsidies to universities and colleges. This ﬁnancial
squeeze on higher education has severely effected to HEIs. Since the incorporation of national
universities in 2004, the appropriation form the central government has been decreasing by one percent a
year. These squeezes are not only reduction of public subsidies to national universities but also revenue
reduction from tuition fees resulting from the decline in absolute numbers of enrollments, in particularamong private universities and colleges. Most private universities and colleges have been experiencing
the decrease of applicants and enrollment because the decreasing eighteen-year-old population. Adult
students have been increasing, but they have only a few percent of enrollments.
However, it is very difﬁcult for most private universities and colleges to raise tuition fees because it
may lead to loose their prospective students and their revenue. Before incorporation the diet decides thetuition fees of national universities. However each national university has a power to raise their tuition
fees within a cap of 10 percent increase since 2006. Then the cap increased till 20 percent in 2007. The
tuition fees of all national universities are same among all national universities and all departments
except low schools. However most universities and colleges do not raise the tuition fees because they
believe lower tuition fees will contribute to the equality of educational opportunity, in particular, for theaccessibility of low-income class.
As is shown in Figure 2 the tuition fees of national universities have been rising very rapidly, and mosteducators except the Ministry of Finance and some economists think they are too high for low-income
class.

53

Figure 2 Changes in National University Tuition Fees (2005 Constant Yen)
Yen
900,000
800,000
700,000
600,000
Tuition Fees
Entrance FeesFirst Year Total

500,000
400,000
300,000
200,000
100,000
0
1970

1973

1976

1979

Source: National Budget, each year

1982

1985

1988

1991

1994

1997

2000

2003

Year

On the contrary the tuition fees revenue of most private universities and colleges have been
decreasing, though they have been raising their tuition fees shown in Figure 3. Both national and private
universities and colleges have been facing very severe ﬁnancial condition, if they could raise the tuition
fees.
Figure 3 Changes in Private University Tuition Fees (2005 Constant Yen)
Yen
1,400,000

1,200,000

1,000,000

Tuition Fees
Entrance Fees
other feesFirst Year Total

800,000

600,000

400,000

200,000

01975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Year
source: Ministry of Education, Survey on Private Schools Tuition Fees, each year

54

The rapid raising of tuition fees has seriously affected the family with a prospected student. Figure 4
shows the rising proportion of tuition fees against family disposable income per month. Most Japaneseparents pay the tuition fees of their children. The burden of paying tuition fees is heavier in low-income
class.
Figure 4 Changes in a Proportion of Tuition Fees to Monthly Disposal Family Income
3.5

3.0

2.5

2.0
Nat Tuition/ Family Income
Pri Tuition/ Family Income

1.5

1.0

0.5

0.0
1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Year
（Source: National Budget; Miniｓtry of Education, Survey on Private University Tuition; and Ministry of Cabinet, Household Survey, each year

3.3. Changing Student Financial Assistance Policy
The overview of student ﬁnancial assistant programs of JASSO is outlined in Shibata's paper in thisreport. I would like to pay your attention to the rapid increase of Type II (low-interest loan) since 1999,
as is shown in Figure 4. In 1999 the Ministry of Education changed the student ﬁnancial aid policy andincreased the Type II (low-interest) loan very much. Figure 1 shows this rapid increase of Type II loan,
though the reasons and background of this sudden change were not clear.
3.4. Trends in Student Loan and Loan Burdens
The tuition fees have been rising very rapidly both in national universities and private universities andcolleges as were shown, but the amount of student loans that a student can borrow has not rising as rapid
as tuition fees, though the number of the borrowers have been increasing. Figure 6 clearly shows the gap
between tuition fees and student loan. The amount of Special Loan of Japan Scholarship Foundation (nowJASSO) was more than seven times of tuition fees of national university in 1971. However the increaseof the amount of student loan has not been keeping up with the rapid increase of tuition fees. They
became almost same in 1984. Then the maximum amount of the loan was increased in 1998, when a new
Type II loan, Kibou which literally means “ Hope ” was introduced.

55

Figure 5 Growth in the number of Borrowers of Student Loans
16%
14%
12%
10%
8%
6%
4%
2%
0%

1968 1970 1974 1977 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1996 1998 2000

Undergraduate Type I
Junior college Type I

Undergraduate Type II
Junior college Type II

Source : Japan Student Foundation, Annual Report, each year

Figure 6 Changes in Proportion of Loans of Boarding Students to Tuition Fees
8.0
7.0

no interest Nat U Board

6.0

no interest Priv U Board

5.0

low interest Nat U Board

4.0

low interest Priv U Board

3.0

Special Loan Nat U Board

2.0

Special Loan Priv U Board

1.0

197
1
197
3
197
5
197
7
197
9
198
1
198
3
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9

0.0

3.5. Higher Educational Opportunity by Income Classes
However according to the Student Life Survey the enrollments of national university are equallydistributed among income class (Figure 7). In 1980s and 1990s the lowest income class (Class I,
the bottom 20 percentile class) students were occupied more than the other classes. The situation ofenrollments of private university is more drastic. The richest class (Class V, the top 20 percentile class)56

occupied very large share in 1960s. However, the shares have been declining very rapidly, and it seems
the equalization of accessibility has accomplished since 2000.
Figure 7 Changes in National University Enrollment Rates by Income Classes
35
30
income 20 percentile class

25
20
％

I
II
III
IV
V

15
10
5

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

0
Year
Data: Ministry of Education, Student Life Survey.
Note: Income 20 Percentile class, I:lowest, II: low, III: middie, IV: high V:highest

Figure 8 Changes in Private University Enrollment Rates by Income Classes
50
45
40
income 20 percentile class

35

I
II
III
IV
V

30
％ 25
20
15
10
5

Year
Data: Ministry of Education, Student Life Survey.
Note: Income 20 percentile class, I:lowest, II:low, III:middle, IV:high, V:highest

57

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

0

This equalization trend can be shown by Gini coefﬁcients in Figure 9.
However some researchers have been criticizing these results of the Student Life Survey. Their pointsof critics are following:(1)

The survey cannot grasp the family income properly. The family income shown in Figures are
acquired by questionnaires for students, and therefore, they argue, are unreliable.

(2)

The samples of this survey are decided by each HEI, and, therefore, might not be randomsamples, though the instruction of the survey strictly demands to make a random-sampling toeach HEI. This sampling might make the data biased. In particular the purpose of this survey is
to get basic information for student ﬁnancial assistance, and some HEIs might chose more lowincome students than actual, and therefore the samples would be biased toward low-income
class.

(3)

The trends of proportion among income classes are fractural. This means that there are very
drastic changes in every two year. This may not be the case in reality. The ﬂuctuation depends
on the calculation of participation rates. It is not plausible that these might be ﬂacutuate in each
year.

(4)

Some researchers use random-sampling data and show inequality of higher education are
widening, or at least not improving. However, these samples are too small to make theseﬁndings generalized.

Figure 9 Changes in Gini's Coefﬁcients of University Enrollment Rates by Income Classes
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
-0.3
196
8
197
2
197
6
198
0
198
4
198
8
199
2
199
6
200
0

national
private

4. New Results of Higher Education Participation and Student Loan Burdens
4.1. High School Student and Parent Survey 2006
Thus the evaluations of equality of higher education opportunity in Japan are mixed results. We willshow the new evidence by our new survey. This survey was done both for high school students andtheir parents by area sampling method in November 2005 and only for high school students in March

58

2006. The area sampling method is close to random-sampling, and we got four thousands samples from
400 areas of all over Japan. Therefore these nationwide samples properly represented the high school
students and their parents1.
The results show inequality of private higher education enrollments by income class very clearly, as isshown in Figure 10. Especially the female students enrollment of private university is highly correlatedwith income class.
Figure 10 HEIs Enrollment Rates by Income Classes by Sex
%

60
50

male private univ

40

male national andpublic univ
female national andpublic univ
female private univ

30
20
10
0
-400

400-600

600-800 800-1,000

1,000-

Family Income(million yen)

Source: High school student survey 2005

Further the inequality is very clear when we divide the ratio by high school achievement. Both income
class and achievement are highly correlated with enrollment ratio of both male and female students, as
Figure 11 shows. However the relation is very different between sexes. The enrollment ratios of malestudents are not much different both by income class and by high school achievement. However, theratios are very different in the case of female students. Both income class and achievement are strongly
affected the enrollment ratio. This evidence clearly shows there exists inequality of accessibility inhigher education in Japan.
4.2. Parental Expectation for their Children's Education
When we investigate parental wish for their children to participate the HEIs, we found less difference
by income class. Most rich parents wish their children enroll universities and colleges, while most poor
parents wish their children enroll junior colleges or technical schools. Thus in sum most parents want
their children go to some HEI, and the difference of their expectations for their children to go to higher
1Prof. Motohisa Kaneko and Prof. Masakazu Yano, the University of Tokyo led the surveys.

59

education is not different among income classes.
Moreover most parents have strong willingness to pay for their children's higher education in spiteof their ﬁnancial condition. Figure 12 shows the parental perception of their capability to pay the higher
education costs. We can ﬁnd some difference among income class, but the difference is much smaller
than we expected.
Figure 11 University Enrollment Rates by Income Classes by Junior High School Achievements by Sex
60%

50%

40%
Male low achiver
male high achiver
Female low achiverfemale high achiver

30%

20%

10%

0%
-400

400-600

600-800

800-1,000

1,000-

Family Income(million yen)

Source: High school student survey 2005

Figure 12 Parental Perception of Higher Education:Capability to Pay the Higher Education
Costs by Income Classes
100
90
80
70
60
50
40
30
20
10
0

％

75

79

85

90

93

5

18
3

13
2

10
0

5
2

1

2

3

4

5

21

capablediﬃcult
very diﬃcult

Family Income
20 percentile class

Source: Parents of high school student survey 2005

Most parents also have willingness to pay their children's costs of higher education. Again we foundless difference among income class, though it is sure that difference exists, as Figure 13 shows.

60

We confer that the high enrollment ratio and not much inequality in higher education are sustainedby the parental willingness to pay for their children. It may be ironical that parents who are very eager
to pay for their children's education hide inequality of higher education accessibility. The inequality ofhigher education accessibility may be bigger, if parents do not pay for their children's education. They
might also make the issue not so serious, and therefore the inequality of education does not become
political and social problem in the Japanese context. Furthermore it may be one of the reasons that publicstudent ﬁnancial aid programs are not an important governmental policy.
Figure 13 Parental Perception of Higher Education:Willingness to Pay the Higher Education
Tuition Fees Cost by Income Classes
％
100
90
80
70
60
50
40
30
20
10
0

33

20
16
23

34

24
18

40

48

61
Full cost

26
15

8

18
5

15
5

1

2

3

60-90 percents

22

Half

17
10
2
4

23

10-40 percent

9
6
1
5

None
Family Income
20 percentile class

Source: Parents of high school student survey 2005

4.3. Loan Burden and Loan Aversion
Another big issue concerning student loan is a loan burden and loan aversion. When some borrowers
feel the loan burden is too heavy and think it difﬁcult to repay after graduation, they may choose not toapply for higher education, or at least to change types of institutions or location of institutions. This isvery serious matter because the purpose of student loan programs is to contribute to the ﬁnance of someprospective students as ﬁnancial assistance, but if some prospective students or parents have a tendency
to avert loan, loan programs are not helpful for them. If a prospective student considers he or she will
not be able to repay the borrowing money after graduation, he or she may change the decision from hisor her most desirable institution or program to cheaper institution or program. At the most extreme casehe or she may give up to apply for HEIs.
Therefore it is very important to investigate they have a tendency of loan aversion. In the case of theUnited Kingdom, Callender and Jackson found the loan aversion among high school students (Callender
and Jackson 2005).
We found the loan aversion for low-income class as Figure 14 shows. We might face the loan aversion

61

problem in the near future in Japan because loan borrowers of low-income families are increasing
rapidly, as we mentioned. However, the tendency is not so strong. One reason of this weak loan aversionof low-income class is the strong parental educational aspiration to their children.
Figure 14 Parental Loan Aversion by Income Classes and Mother's Education: Unwillingness toborrow the Student
％

5

8

55

51

46

41

41

45
5

33

30

33

37

6

5

5

7

9

3

4

5

58

6

7

2

52

7

7

6

7

14

54

54

46

29

34

34

39

6

6

8

43

Strongly disagree
Disagree
Agree
Strongly agree

14

juniorschoolhighschooljuniorcollegeuniversity
and college
graduateschool

9

1

100
90
80
70
60
50
40
30
20
10
0

Famliy Income 20 percentile class

Mother's education

Source: Parents of high school student survey 2005

4.4. Findings of Our Survey
Major ﬁndings of the survey are following:(1)

Tuition fees of both national and private universities and colleges have been raising andcolleges. Student loan borrowers have been increasing since 1999.

(2)

Widening inequality of accessibility to higher education, in particularly to private institutions
among female, low-income and low-achievers is found.

(3)

Strong relationship between enrollment, income class and academic achievement of highschool student is found. Both family income and academic achievement have strong inﬂuences
to the choices of the high school students.

(4)

Most parents have very strong willingness and perception of ﬁnancial capability to cover thehigher education cost for their children.

(5)

There exists a tendency to avert student loans, particularly among low-income and lesseducated families, but it is not much difference among income classes.

5. Policy Implications
From our survey results, we propose some policy implications.

62

5.1. Rationalization of the Purposes, Objectives, and Targets through Student Financial Assistance
We have to reconsider the student ﬁnancial aid programs in Japan. Most policy problems on student
ﬁnancial aid programs still have remained unsolved since the foundation of Japan Student ScholarshipFoundation in 1944. For example, most important thing of the reform of the student ﬁnancial assistanceis criteria of selection of student aid receptors. JASSO has been using two criteria, merit- and needbased. It may be unique characteristics of Japanese student financial aid to weight to two criteria
equivalent weight, and this seems to have been functioning well till now. But using two criteria makes
the purpose of student ﬁnancial aid programs and targets of recipients vague. So we must reconsider the
purposes in the light of new situation.
5.2. Adopt an appropriate and most effective ﬁnancing scheme:
Secondly we have to search any feasible policy options for improvement of collection scheme. The
default rates of JASSO student loans have not been so high that it does not have strong penalty tools
nor a tracing system of borrowers. In sum, we have not been having strong needs to have infrastructureof student loan collection scheme. However the default rates are rising gradually, as the number ofborrowers is increasing. So we face a new problem of defaults. Will we strengthen the penalty or create a
new collection scheme, or completely convert to income-contingent loan scheme? This is a policy issue
we have to discuss with a longer perspective of future policy on student loan programs. JASSO set a
committee to reform the loan collection scheme in 2007, and the report will be published near future.
5.3. A new need-based grant scheme for students from the lower income families national/
institutional level
The serious emerging problem of the student loan programs is the “ loan aversion ” behavior ofprospective borrowers, in particular of those low-income borrowers. This is very pervasive trend among
countries where student loans are popular, and we found this loan aversion behavior among low-income
families in Japan. It may be a serious problem as the student loan volumes increase and the penalty
becomes rigorous, though it is not a serious problems in Japan. We think we need another type of student
ﬁnancial assistant programs such as a grant for undergraduate students in Japan, since we have scare
grants for undergraduates that is very unique characteristics of Japanese public student ﬁnancial assistantprograms.
References
Callender, C. and J. Jackson (2005). “ Does the Fear of Debt Deter Students from Higher Education? ”
Journal of Social Policy 34: 509-540.
Johnstone B. D., 1994, Tuition Fees, International Encyclopedia of Education, Husen T. and T. N.
Postlethwaite, (eds.)

63

5. The Australian Experience of an Income
Contingent Loans Scheme
Craig McInnis(Research Institute of Higher Education, Hiroshima University)

INTRODUCTION
Australia was the first country in the world to implement a national income-contingent loan (ICL)
charge for student tuition. This radical approach to student financing, the key component of theHigher Education Contribution Scheme (HECS), was launched in 1989. HECS has been the platform
for a remarkable series of changes in the Australian higher education landscape and despite major
policy modiﬁcations in 1996, 2003 and 2007. the core principles and deﬁning features of HECS haveremained essentially constant over the last 18 years. New Zealand, South Africa, Chile and the United
Kingdom have since developed ICL schemes of their own, and along with other countries, the Japanese
Government is considering an ICL option to address a number of challenges, including moving the costof tuition from parents to students.
The purpose of this chapter is to provide an overview of the Australian system of ﬁnancing student
tuition and to consider the relevance of such a scheme for the Japanese context. The chapter describes
the key characteristics and origins of the Australian cost sharing initiatives and discusses recent changes
in tuition fee policies and mechanisms. It then brieﬂy reviews ongoing and emerging issues concerning
institutional diversity, access and equity, and student choices and decision-making. Finally, someobservations are made on the relevance of the Australian system ̶ in terms of its potential social andeconomic effects ̶ for proposed reforms in Japan

POLICY ORIGINS AND CHANGES
Mapping the changes in policy and the mechanics of HECS, from its introduction in 1989 to the 2007
budget announcement of major shifts in the funding of Australia's higher education system, provides
insights into the impact of the changing social and economic context on HECS arrangements and viceversa. HECS was a central component of the radical reforms that expanded provision and combined
Australian universities and colleges of advanced education into a National Uniﬁed System in 1988. The
Hawke Labor Government was motivated by an anticipated peak in demand from school leavers foruniversity places in the early 1990s that it could not meet in political terms with additional taxation. The
Wran Committee charged with making recommendations on a new system of student ﬁnancing argued

65

that the existing no-tuition fees policy was an unfair burden on average taxpayers who were unlikely
to use higher education, and who would receive much lower incomes over their working lives thanmost university graduates (Beer and Chapman 2004:2). The Committee also argued that fees charged to
students should reﬂect the cost of the course they undertook.
HECS was initially a simpliﬁed version of the scheme proposed by the Wran Committee. Instead of
the preferred scheme with three levels of charges to reﬂect differences in the cost of course provision, theGovernment decided to charge a ﬂat rate of $1800 per unit for a full-time student regardless of ﬁeld ofstudy. All students in all Australian universities were required to contribute to the cost of their education
through fees for tuition. There was, and still is, limited support available to assist some students withliving costs.
The most distinctive feature of HECS is that students do not have to pay tuition fees when theyenroll at university. The key principle underpinning this is that no student should be prevented fromenrolling in a university course because they are unable to pay fees upfront. Indeed, students inAustralian universities do not need to pay fees at all. It is only when they have left university ̶ and by
deﬁnition are no longer students ̶ that they must pay back the interest free loan they received from theGovernment. If students leave university without completing their degree program they are still obliged
to repay the debt they accumulated for the period they were enrolled. The HECS debt is collected
directly via the taxation system whether people are employed or self-employed. Students also have theoption of paying the subsidised fees up-front each year with a discount, set initially at 15 per cent, as anincentive.
The other key feature of HECS is that it is an income-contingent loan. That is, until workers reach a
speciﬁed threshold of annual income, they make no repayments for their tuition fees at all. This meansthat a person who is never employed, or is employed on an income below the threshold, may neverbe required to pay back the HECS debt they accumulated while attending university. The principle
underlying this is that the HECS debt should be tied to a speciﬁed level of private beneﬁt, and that there
should be no repayment without the signiﬁcant private beneﬁt currently set at the average Australiansalary.
The repayment schedules were also designed to reduce the impact of HECS on the initial earnings ofgraduates and thus further minimise any deterrent factor for prospective students. In 1989 the ﬁrst loan
repayment rates were 1, 2 and 3 per cent of a person's income depending on the level of income. It isalso important to note that the HECS loan is interest free and that there is no additional interest rate on
the debt, although the debt and repayment thresholds were indexed initially to the Consumer Price Index66and later to Average Weekly Earnings (DEST 2003:289).
From 1990 to 1994 there were changes in HECS repayments and income thresholds that involved
some fine-tuning of the scheme. The significant proportion of students paying HECS upfront was an
unexpected windfall for the Government and universities. In 1993 the discount was raised to 25 per centwith the aim of increasing the proportion of students choosing to pay up-front. Students were able to
make voluntary lump sum repayments at any time that also attracted a discount. The discount has been
reduced now to 20 per cent.
In 1996-7 the Liberal Government introduced signiﬁcant adjustments to HECS. They included a major
increase in the HECS charges with differential charges by ﬁeld of study related to the cost differences of
the courses of study (as originally proposed). Law courses were a controversial exception with students
charged well above the actual costs of tuition on the grounds that the private rewards to law graduateswere likely to be high.

POLICY CHANGES AND ARRANGEMENTS 2003-2008
HECS has been the primary marker of the change in the balance between private and public payments
towards the cost of higher education in Australia. In 1991 HECS payments represented 21 per cent of
university operating grants and by 1999 this had grown to 31 per cent (DEST 2003). This was part ofa continuing overall shift in funding sources for universities towards non-Government revenue. The
payments, up-front or via taxation, formed part of the Commonwealth operating grants to universities
so they did not impact on the overall revenue available for institutions. In 2005 Government grants
made up 41.3 per cent of revenue for publicly funded higher education providers, and 14.3 per centcame from HECS (including upfront payments). To put this in perspective, the remaining 44.4 per centof revenue came from: international fee-paying students and other student fees and charges (22.9 percent); consultancies and contracts (4.9 per cent); investment income (4.1 per cent); and, a range of othersources (12.5 per cent) (DEST 2006).
This 2005 revenue picture is the outcome of the 2003 package of reforms, Our Universities: Backing
Australia's Future (BAF). The Higher Education Support Act 2003 (HESA) established the framework
for the implementation of the reforms. The ﬁnancial aspects from these reforms were introduced in 2005.
Forms of tuition support
Three forms of tuition support for domestic students in Australian universities were created under the2005 Higher Education Loan Programme (HELP). The ﬁrst is HECS-HELP which replaced HECS. Thisis a subsidised loan for students receiving a Commonwealth Supported Place (CSP) at university. Most

67

domestic students are subsidised by the Government, and the student contribution varies by discipline
and university. The Government pays the loan amount directly to the university (or other eligible
provider) on behalf of the student. Partial deregulation of the fees allowed the universities to increase
HECS tuition costs up to a maximum of 25 per cent above the base amount set by the Government. The
reforms also placed a limit of 8 years full-time on the number of years a student may study in a CSP.
There is no tax deduction for repaying part or all of the HECS-HELP loan.
The second form of support under the HELP scheme is called FEE-HELP. This is a loan available
to domestic students who choose to take a full fee place. The FEE-HELP loan covers up to the fullamount of tuition fees for a domestic undergraduate or postgraduate course. These places do not receive
Government funding and there is no restriction on the fees universities can charge. Clearly, the gap
between the loan limit and the fees charged may present a problem for universities and students alike.
Under pressure from the universities the loan limit set by the Government in 2005 of $50,950 (themaximum a student can borrow over a lifetime) was increased in 2006 to $80,000 for all courses except
Medicine, Veterinary Science, and Dentistry, which were increased to $100,000. FEE-HELP students arecharged a 20 per cent loan fee on top of the amount borrowed and may be entitled to a tax deduction forthe cost of the tuition fees.
A third element of the HELP scheme of limited interest to this discussion is called OS-HELP. This isfor eligible domestic students who need ﬁnancial assistance to study overseas.
The 2003 reforms allowed universities to offer a maximum of 35 per cent of student places as fullfee. This was for all disciplines except Medicine, which the Government limited to 25 per cent of places.
Universities argued vigorously for these caps to be removed since it left them in the invidious position of
being expected to generate income from private sources in a market environment while being restricted
both by the Government caps on the fees they could charge, and also by the numbers of fee-paying
students they could enroll, in each discipline area.
The 2007 budget removed those restrictions. From 2008, universities will be able to offer as many
full-fee places as they are able in the context of the market. There is one proviso: the universities mustfirst offer all the CSP (HECS-HELP) places agreed with the Government before they can offer fullfee places. The actual numbers of available CSP places will increase by 21000 in 2008 along with anincrease of almost 5 per cent in the funding per place.

68

The Commonwealth Grant Scheme
The HELP system needs to be understood in the context of the overall funding system. Universities
currently receive a grant from what is known as the Commonwealth Grant Scheme (CGS). Under that
scheme the Australian Government funded eligible higher education providers to deliver a specified
number of places in particular funding clusters based around academic disciplines or ﬁelds of study. To
receive a grant under the CGS a higher education provider must enter into an annual funding agreementwith the Australian Government. In 2005 that agreement specified the number of Commonwealthsupported places the provider was funded to offer students in each of 12 discipline clusters. Units ofstudy in each funding cluster attract a Commonwealth contribution rate speciﬁed in the Act.
Illustrating the adaptability of the Australian scheme, and its potential for responsiveness to contextual
change, the 2007 budget reduced the clusters from 12 to 7 for funding in 2008. Table 1 shows the baselevel CGS funding cluster rates per equivalent full-time student load for 2008. Medicine, Dentistry, andVeterinary Science and Agriculture will receive the highest amounts of Commonwealth grant at $18,227
and Law, Accounting, Administration, Economics and Commerce receive the lowest with $1,674.
Table 1: Funding cluster grant rates 2008
Discipline clusters
1
2

3

4

5
6
7

Law
Accounting, Administration, Economics, Commerce
Humanities
Mathematics and Statistics
Behavioural Science and Social Studies
Education
Computing, Built Environment, other Health
Clinical Psychology
Allied HealthForeign Languages
Visual and Performing Arts
NursingEngineering, Science, Surveying
Medicine, Dentistry and Veterinary Science
Agriculture

Funding in 2008
$1,674$4,674$8,217$10,106$11,280$14,363$18,227

Source: DEST 2007
Universities have been set a maximum student contribution amount for an equivalent full-time student
load place that they may charge students for units of study. In 2005 the areas of study were grouped69

into three bands, and a range of charges set for each group. Education and nursing were designated asnational priority clusters. Table 2 shows the maximum student contribution amounts for an equivalent
full-time student load place that may be charged for units of study in 2007.
Table 2: Maximum student contributions 2007
Student
contribution band
3
2
1
National
priorities

2007 Student contribution ranges
Law, Dentistry, Medicine, Veterinary Science
Accounting, Administration, Economics, Commerce,
Mathematics, Statistics, Computing, Built Environment,
Health, Engineering, Science, Surveying, Agriculture
Humanities, Behavioural Science, Social Studies, Foreign
Languages, Visual and Performing Arts

$8,333

Education, Nursing$3,998$7,118$4,996

Repayment thresholds
Changes in the minimum threshold for compulsory repayment of the HECS debt illustrate theadaptability of the HECS to changing conditions and policy contexts. Of course, it also indicates thepotential exposure of ICL schemes to short-term political exigencies. In 1989 the minimum thresholdfor compulsory repayment of loans was set at $22,000 and was indexed by the Consumer Price Index. In
1993-4 the thresholds were recalculated to reﬂect Average Weekly Earnings. In the 1996-7 adjustments
referred to earlier, the threshold for the commencement of repayments was increased to $28,495, but thefollowing year this was reduced to $20,701 thereby increasing the number of people required to makecompulsory repayments (DEST 2003). The thresholds and repayments rates were adjusted again in the2003 reforms as shown in Table 3.
Table 3: Income thresholds and repayment rates, 2004-05
For repayment income in the annual Rate (%) to be applied tosalary range (AUD$)
repaymentLess than 35 001
Nil
35 001 to 38 987
4.0
38 988 to 42 972
4.5
42 973 to 45 232
5.0
45 233 to 48 621
5.5
48 622 to 52 657
6.0
52 658 to 55 429
6.5
55 430 to 60 971
7.0
60 972 to 64 999
7.5
65 000 and above
8.0
Source: Higher Education Support Act 2003

70

ONGOING AND EMERGING ISSUESOne of the architects of HECS argued that the 2003 reforms would ultimately lead to the mostsignificant transformation of the financing of higher education in Australia in more than 30 years(Chapman 2004). The 2007 federal budget conﬁrmed these predictions of transformation in no uncertain
terms. Similarly, Norton (2006:2) saw FEE-HELP having the potential to reform higher education
radically and that the new FEE-HELP loans ʻ empower universities as entrepreneurs and students as
consumers, strengthening markets in higher education.' However, Norton regards the loan caps as a
ʻ crude way of controlling lending' by the Government and suggests that ʻ a truly radical reform would
make student loans mimic commercial loans'. While only 3 per cent of Australian domestic students are
currently in full fee places, the 2007 budget sets the scene for the expansion of this category in the longerterm.
For some critics the 2007 budget is seen as the beginning of the end for government-subsided places.
They argue that universities will ultimately be able to shift entirely to full-fee paying places in somecourses and that this will be the primary source of future growth for the sector. Others argue that theincreased ﬂexibility given to universities could result in CSP places being shifted to selected courses
and therefore there will be less need to top up those courses with full-fee students. It remains to be seen
how universities respond to the opportunity to change the mix of public and privately funded places.
However, the Government has declared that it will not allow universities to substitute fee-paying
students for CSP students, that is, they can increase the numbers of fee-paying students wherever to suit
their mission and needs but are still required to offer existing CSP places allocated after negotiations
with the Government.
Diversiﬁcation and specialization
Institutional diversity was one of four principles underpinning the 2004 Backing Australia's Futurereform package (the others being equity, quality, and sustainability). The need for diversity wasprompted in part by the concern that universities were not responding sufﬁciently to the labour market
needs especially at the local and regional level and were essentially pursuing the same goals. Moreover,many universities were providing a ﬁnancially unsustainable breadth of programmes. As the Minister put
it in a speech on the need for diversiﬁcation:
ʻ We are a country of 20 million people with 37 public universities and three private universities
including the new Carnegie Mellon campus in Adelaide. We have neither the population nor
sufﬁcient high-quality academic staff to maintain 37 comprehensive universities which are allundertaking teaching, scholarship and research across a broad range of disciplines.' (Bishop
2006)

71

From the Government's perspective, the benefits of a more diverse system include: greater choices
for students; increased competition and excellence among institutions; and increased innovation andinvention. Universities should therefore differ in terms of mission, discipline mix, course offerings,
modes of delivery, management and in academic structure. Given the view of the Governmentthat Australia can only support around 10-12 comprehensive universities, the way is open for thedevelopment of specialist institutions. This includes public and the small but potentially increasing
number of private universities.
HECS has become an instrument to promote and secure the goal of diversiﬁcation of the sector. The roleof HECS in this respect is also likely to become a contentious issue. The most notable example is theuse of HECS to support the historic shift of one of Australia's leading research-intensive universities,
the University of Melbourne, to a US model. Melbourne will eliminate 96 undergraduate degree
programmes, and replace them with six generalist degrees. It is establishing graduate entry programsfor professional courses such as Law and Medicine. To do this required support from the Government
to move CSP allocations from undergraduate to postgraduate level which was readily agreed. The
university intends to reduce the number of HECS places over a 20-year time-frame and double its fullfee numbers.
The introduction of FEE-HELP also supports the growing private higher education sector. More than 40
private higher education providers have been approved to offer FEE-HELP to assist domestic students to
pay tuition fees. This effectively supports potential competition from the private sector. The allocation ofsubsidised student places is a crucial tool for Government in the pursuit of diversity. An emerging issue
is the extent to which this and future strategies will impact on the core principles and key elements of the
HECS model.
Access and equity
Increasing the access and participation rates of disadvantaged students has been a priority inAustralian higher education policy for more than 30 years. As noted above, equity is also a key principleof the 2003 reform package. The goal of higher education equity policy is to remove barriers to accessto higher education. The National Higher Education Equity Framework is based on the assumption that
there are factors or characteristics that, for certain social groups, inhibit their access to higher education
and ability to succeed at university (OECD 2006).
One of the main objections to the introduction of HECS from its beginnings was that, despite the key
feature of no fee obstacle at the point of entry, any fee would still discourage people attending university
from disadvantaged backgrounds. The argument is made that this is because people from disadvantaged
groups are debt aversive, although the evidence in support of this is largely anecdotal. In any event, thiscannot be readily separated from associated factors. For example, in the case of low socio-economic

72

students, especially those from rural areas, the opportunity costs for families in terms of loss of income
earned while their children are at university are generally more signiﬁcant than for most other students.
Overall, once enrolled, students from targeted equity groups have tended to achieve success andretention outcomes comparable to that of other students. This suggests that the primary causes of
disadvantage are concerned with prior education experience and socio-economic environment. Researchon the impact of HECS on the participation of students from disadvantaged backgrounds shows they
were actually less likely to attend university when there were no student fees at all. There is no evidenceof a decrease in the participation of students from relatively poor families (Chapman 2005:68). However,
the evidence also shows that while the number of students from the deﬁned equity groups has increased,
their share of total enrolments has not improved (OECD 2006). That is, their relative disadvantage
remains constant. Chapman makes the further point that more places were made available for more
students overall at the same time the HECS scheme was introduced, but it does not follow that HECS
was the reason for this increase: it coincided with it.
However, the context is changing with respect to student living costs and this is likely to shape further
policy developments in student ﬁnancing. A survey by the Australian Vice-Chancellors Committee of
19,000 students across all Australian universities shows that almost 25 percent of undergraduates takeout a repayable loan to support their studies (AVCC 2007). The extent to which these loans are for basic
living costs is not clear. Nevertheless, this trend has the potential to undermine the key virtue of the
HECS loan system whereby nobody was deterred from study by not being able to pay the fees, as one
Vice-Chancellor argues: ʻ if you can only survive at university by taking out a loan, you are beginning to
introduce an up-front component. You are beginning again to inﬂuence who goes to university.' (Armitageand MacNamara, 2007)
As more students accumulate private debts around $25,000 over the duration of their degree program,on top of their interest free HECS debt, the level of private debt multiplies the difﬁculties of repaying thecost of the university education. Private loans take the form of bank loans and credit cards, and students
also borrow from parents or depend on spouses. Although the amount of money borrowed by many
students is not great, the AVCC survey shows that many more students are borrowing. This is reﬂectedin the increasing number of students working part-time. The survey follows a series of studies showingthat many students rely on support from parents or partners to meet living costs. It also conﬁrms thatfull-time undergraduate students in Australia are working almost 15 hours a week in part-time paid
employment (McInnis and Hartley 2002). This disguises quite signiﬁcant variations with large numbersof students in certain fields of study working considerably more than 15 hours a week even whenenrolled as full-time students.

73

The 2007 budget addressed some aspects of these financial pressures on students. The number ofCommonwealth Scholarships providing living costs assistance was increased for students from low
income backgrounds, particularly those from rural and regional backgrounds where there has been
little change in participation rates over the last decade. Also, eligibility for the two major living support
schemes, Youth Allowance and Austudy was extended to students undertaking masters courseworkdegrees.
Equity issues associated with HECS are not confined to creating opportunities for disadvantaged
people or removing obstacles to their participation. Concerns about equity as fairness are emerging
more strongly as universities increase the number of full-fee-paying places in high demand andselective admissions courses. Currently, students who fail to attain a sufficiently high entry score fora Government subsidised HECS-HELP place are able to apply for a full-fee place in the same course.
Typically, a university sets a minimum national entry score (known as ENTER) for each of its degree
programs. This is calculated on the basis of institutional experience and judgement about the academic
potential of students to pass the course, and the risks of admitting students who may not be able to copewith the academic demands. As noted above, under the current arrangements, the Government agrees
to subsidise a number of places for each program. When these places are ﬁlled by the students above
the ENTER score cut-off, additional full fee-paying places can be offered by the university to students
who are judged to be capable of passing the degree but whose results were not high enough to get a CSP.
These non-CSP students do not have to pay fees upfront – they have the option of taking a FEE-HELP
loan.
Since individuals can accumulate a mix of HECS-HELP and FEE-HELP debts the end result is quite
signiﬁcant differences in the debt levels accumulated by students on graduation from the same degree ̶in some instances separated by the barest of margins in their ENTER scores. For example, in the case of
a combined degree in Arts/Law in one university, the ﬁnal accumulated debt for a student could range
from around $34,000 to as much as $100,000 depending on the mix of HECS-HELP and FEE-HELP
involved. The impact of the 2007 budget with respect to the removal of caps on the full-fee places isunlikely to immediately change this situation.
Student choices and the labour market
There is little evidence of HECS overall deterring student participation in higher education inAustralia although concerns are emerging about the extent to which the FEE-HELP scheme will impact
on student choice of university, degree program and career path.
A review of the 2003 reforms conducted for the Ministerial Council on Education Employment,
Training and Youth Affairs (MCEETYA) asked the key question: ʻ Is there a tipping point, beyond which74some members of the community will judge the price of higher education to be in excess of its private
beneﬁt?' (PhillipsCurran 2002). There is no evidence to suggest that it has passed that point nor is it notpossible to predict when students will choose not to go to university because it does not represent value
for money. There is also no evidence to suggest that students have a clear idea of the speciﬁc level ofdebt they will incur at university, or that graduates are negative about making HECS repayments fromtheir income as a component of their taxes. However, with the likely increase in full-fee student places
following the removal of the numbers caps, the perception of loan burden is likely to become more of anissue.
The use of HECS as a means of steering student choices and the labour market is regularly debated.
For example, in response to the suggestion that HECS debt should be lowered to reduce the shortage inscience and mathematics teachers, Chapman (2007) argues that there has been very little change in thecomposition of student enrolments by course despite changes in the HECS fees, large or small. However,there is some indication that in certain ﬁelds of study such as nursing and teaching, students are more
inclined to be cautious about their HECS-HELP commitment because of ﬁnancial considerations. The
MCEETYA review found that students in education and nursing appear to be more sensitive to fee levels
than students in other areas. Students in these ﬁelds of study have a number of distinctive characteristics
that make HECS more problematic: for example, they are more likely to come from low socioeconomic
backgrounds and less likely than other students to pay HECS fees up front (PhillipsCurran KPMG 2002).

RELEVANCE OF THE AUSTRALIAN SYSTEM FOR JAPANThe ICL aspect of HECS cannot be meaningfully isolated from the package of interrelated policy
measures developed and refined over time to finance universities and to support students. While it isneither possible nor desirable to implant the Australian or any other system into the Japanese context
there may be elements that are capable of being directly adapted. In the discussion that follows somesimilarities and differences between the Australian and Japanese social and economic environments are
set against a summary of the broad beneﬁts and advantages of the HECS experience from the Australia
perspective.
The beneﬁts and advantages of HECS
The most obvious social and economic benefit of HECS for a relatively small economy such as
Australia has been the dramatic increase in the overall provision of higher education. The number ofstudents attending university since HECS was introduced has grown by more than 50 per cent anddespite the significant increases in fees there has been no evidence of a decline in applications foruniversity. Australian governments have attempted to use HECS to simultaneously influence student
choice, improve equity, and manage the workforce supply. While the evidence on the outcomes in these75

respects is neither comprehensive nor compelling, it is reasonable to conclude that HECS has played amajor role in funding the development of a highly educated workforce that would otherwise not havebeen possible.
A major advantage of HECS that tends to be understated is that the debt is effectively invisible formany students and their families. The income contingency arrangement significantly reduces anxiety
about the risks associated with course choice and outcomes for individuals. In the longer term, although
the charges have inevitably increased, the interest free loan makes HECS-HELP less of a perceived
burden compared with other loan arrangements. However, the beneﬁts of HECS for equity and access do
not appear to extend to the most disadvantaged groups.
A further beneﬁt of HECS is that it is inexpensive in administrative terms. There is no loan insurance
and no default or risk premium and collateral issue. In 2001 it cost less than 2-3 per cent of the $800
million collected to administer the scheme. As Chapman (2005) acknowledges, the ﬁndings concerning
revenue, access and growth could also come about in non-ICL arrangements, nevertheless:
Because of the risk and uncertainty with respect to students' future incomes, an ICL approachis suggested to have the potential for delivering efﬁcacious economic and social outcomes. The
essential beneﬁt is that, if designed properly, ICL is the only form of ﬁnancing that offers bothdefault insurance and consumption smoothing. (Chapman 2005:71)
Tax-based non-commercial schemes such as HECS also have the advantage of limited exposure tocorrupt practices. The corruption that has recently been the subject of attention in the United States,
where commercial loans companies have been accused of paying kickbacks to universities and colleges
to steer students to take loans from ʻ preferred lender' lists, has significantly damaged the credibilityof the universities and lenders involved. According to the New York Attorney General, students ended
up paying higher rates than necessary while other lenders charging potentially lower rates were denied
access to students by the colleges involved (Chronicle 30 March 2007). The intervention of the US
Secretary of Education was also prompted by the potential misuse of the National Student Loan Datasystem that contains personal information about student borrowers (Chronicle 25 April 2007).
Similarities and differences in contexts
The Australian context posed quite different challenges that prompted the introduction of HECS in
the 1980s from those driving the 2007 budget initiatives. Australia was at that time looking for ways toﬁnance the expansion of the higher education system as the basis for economic growth. It also needed
to satisfy demands to improve the participation of students from lower socio-economic groups at the76

very least by expanding the number of university places. The Japanese interest in alternative systems ofstudent ﬁnancial assistance is prompted by an aging and declining population, increasing competition
for a limited pool of talented students, a widening income divide, and the declining capacity of lower
income groups to pay the costs of tuition for their children. As Kaneko observes:
ʻ It is envisaged that the population size of 18-year olds will decline dramatically from more than
2 million in 1992 to about 1.2 million in 2010. This will create redundant enrolment capacity
at the Universities; and the supply-demand gap will disappear. The selection of students will
undergo signiﬁcant changes, and it is likely that the economic beneﬁt from a university degree
will decline at least for some students.' 2005:14)
The latter point adds some weight to favouring a HECS-style option: if it increasingly turns out thatsome students do not experience the private benefits traditionally due to graduates, then the risk ofopportunity cost alone is likely to deter their entry in the ﬁrst place, or, if they do graduate, the failure
to gain signiﬁcant ﬁnancial beneﬁt will increase the likelihood of graduates defaulting on loans when
the tangible rewards of a degree fail to materialise. If the Australian experience is any guide it is theuncertainty about the financial benefits of degrees at the margins, rather than fear of debt, that will
reduce participation from lower income groups. As in Japan, more graduates in Australia are ﬁnding
employment in areas unrelated to their degree program and that tends to undermine conﬁdence in thevalue of a university education.
Moreover, the changing demographic proﬁle of the undergraduate population in Japan, combined with
the intense international and local competition for professional skills, is likely to restrict the pool of talent
to students from middle and high income families, and possibly individuals with exceptional abilities
from lower income groups. Students who may otherwise have achieved beyond what their school
performance might predict are excluded prematurely from the system. To engage the available talent theGovernment might need to consider increasing its level of risk-sharing speciﬁcally in support of students
with school records that are traditionally less reliable predictors of university performance. Drawing on amore diverse student population will also require universities to reconsider their expectations of students
and approaches to instruction.
An interesting question from the Japanese perspective concerns the impact of ICL systems such as
HECS on graduates' motivation for employment. Given that graduates who earn below the thresholdsalary level are not liable to repay the HECS loan it is a reasonable question. It might be argued that
this encourages ʻ free-riders' to enrol in university degrees and who, perhaps for lifestyle reasons,then choose to earn income below the threshold and therefore avoid repaying the loan. The Australian77

experience does not support this notion at all. A related side benefit that might be of relevance toJapanese policymakers is that Australian women who plan to rear children after graduation are notdiscouraged from starting families by tuition debt. However, as noted above, there is some evidence thatonce they have children women are reluctant to then enter higher education because they are concernedthat it might impose a debt on their family.
The HECS approach, and the ICL component in particular, may also address issues in Japan
concerning linkages of university and labour market. For example, Arimoto (2007) points to the categoryof workers currently not engaged in employment, education or training (NEETs), unmarried and notseeking work or training, now increasing in Japan. Engaging these people in education and training
presents a challenge that might be met by an ICL system. Likewise, the impact of the widely discussed
phenomenon of ʻ freeters' – young people who choose not to work in regular jobs – needs to be taken
into account. They are predicted to reach ten million in 2014, an increasingly signiﬁcant proportion given
the declining population of full-time workers. Relying on parents as the primary source of funds fortuition in the long term may be impossible.
Related is the problem of articulating university education with the professions and vocations: ʻ The
substantial development of future society in the 21st century necessarily requires further developmentof higher education to train adequately the younger generation.' (Arimoto 2007:9). Added to this is the
major change from a traditional Japanese management structure to contract and annual salary systems.
The pre-conditions for risk-sharing are changing. If the Japanese Government decided to promote
lifelong learning, mature age students could become a new and important dimension of the student
proﬁle. It is a matter for speculation as to whether an ICL scheme would promote mature age entry or
re-entry into university-based professional education, or whether the growth in demand for mature age
education will support calls for new systems of ﬁnancing tied to private beneﬁts.
In sharp contrast to Japan, Australia has a long tradition of encouraging mature-age students. There
has been exceptionally strong growth over the last 15 years of enrolments in masters courseworkdegrees. Most of this comes from student and employer needs to meet professional entry requirements toadvance career opportunities, and to improve skills and productivity. Generally, students undertake these
programmes while they are working full-time with rewards and recognition from employers. This wasgiven further impetus in the 2007 budget with an extension of Youth Allowance and Austudy to masters
degree students.

78

CONCLUSION
The introduction of HECS in 1989 met with predictable opposition from a generation that had beenprivileged to have tuition-free university education for only a short 15-year period in Australia's history.
Some felt, and still feel, betrayed by the Labor Government that took away what they assumed was an
inalienable right to free university education. Despite that, after 18 years in operation HECS has become
ﬁrmly embedded and accepted in Australian society as a fair and reasonable system of government andindividuals sharing the costs and beneﬁts of university education. It bears repeating that the fundamental
principle of HECS is that it eliminates the need for students or their families to pay any tuition fees until
they leave university and start earning an above average income.
The budget changes to be implemented in 2008 largely meet the demands of universities for greater
ﬂexibility in the ways they allocate places across different disciplines and according to their particularmission and contexts. The new arrangements also support the Government agenda of promoting greater
institutional specialisation and diversity across the system allowing universities to respond more directly
to student and employer demand, a development of particular relevance to regional universities building
relationships with local industry and business.
Developing a ﬁnancing system ﬁxated on the assumption that the capacity and commitment of parents
to support student tuition costs is somewhat naïve and risky. Finance policies based on somewhat
sentimental assumptions and wishful thinking about a system of higher education entirely dedicated toyoung school leaver undergraduates are out of step with the rapidly changing realities of the student
experience (McInnis, in press). The international mobility of students and the globalised labour market
requires a shift in understanding the changing expectations and outlooks of students. This is part of abroader change in context where notions of a career and working life are becoming increasingly diverse,much more individually based, and entrepreneurial. This applies especially to the current highly mobile
generation of graduates in the professions who understand their market position in the international
competition for talent. Being a student no longer has the transitional and marginal status it once had
when students were a relatively small minority of the late adolescent population who went to university
before they entered the ʻ real world'. Most undergraduates both in Australia and Japan are simultaneously
students and workers in diverse and varying conﬁgurations and time commitment.
The Australian system has enabled it to meet the challenges of diverse needs for students across allages and stages of higher education including the demands of professional lifelong learning. It has alsosustained and advanced the established tradition of an open system whereby mature age entry and reentry into higher education has been made possible for large numbers of the working population. It is79noteworthy that it is likely that HECS will be introduced for Vocational Education and Training courses
as part of the Government strategy to address signiﬁcant national skills shortages.
A national system of financing students for the future will need to be adaptable and responsive tochanging student contexts, their diverse needs, and major shifts in the external environment. As theAustralian system has shown over the last 18 years HECS and its income contingent component has adistinct advantage in that respect.
WORKS CITED
Arimoto, A. “ Recent Issues In Higher Education Reform In Japan: The Relationship Between The
Social System and The Higher Education System. ” Higher Education Forum, Research Institute forHigher Education. Vol 4, February 2007.
Armitage, C. and MacNamara, L. ʻ AVCC moves on student poverty', The Australian 14 March 2007.
Australian Vice-Chancellors' Committee. Australian University Student Finances 2006. A Summary of
Findings from a National Survey of Students in Public Places, CSHE, The University of Melbourne,
February 2007.
Beer, G. and Chapman, B. HECS System Changes: Impact on Students, Discussion Paper No.484 Centre
for Economic Policy Research Australian National University (2004).
Bishop, J. (Hon.) Diversity in higher education. Speech delivered to Curtin Institute Public Policy
Forum, 24 July 2006.
Bishop, J. (Hon.) Increased funding and ﬂexibility for universities. Minister for Education, Science andTraining. Budget media release, 8 May 2007.
http://www.dest.gov.au/ministers/bishop/budget07/default.htm
Chapman, B. “ A Critical Appraisal of The New Higher Education Charges For Students. ” Dialogue Vol
23.1 (2004).
Chapman, B. “ Income Contingent Loans for Higher Education: International Reform ”. Centre for
Economic Policy Research, Australian National University. Discussion Paper No. 491, June 2005.
Chapman, B. “ Tinkering With HECS Won't Change Students' Choices. ” The Age 22 February 2007.
Chronicle of Higher Education. N.Y. Attorney General pushes colleges to settle accusations of studentloan abuses. 30 March 2007.
Chronicle of Higher Education. Secretary of Education creates committee to deal with student-loanissues. 25 April 2007.
Department of Education, Science and Training (DEST). National Report on Higher Education 2001,
Canberra 2003.
Department of Education, Science and Training (DEST) Financial Statements for Higher Education

80

Institutions for 2005. Canberra 2006.
Department of Education, Science and Training (DEST), Minister for Education Science and Training 8
May 2007. http://www.dest.gov.au/ministers/bishop/budget07/bud05_07.htm
Kaneko, M. and Yano, M. High School Students and Parents Survey, First Survey. The University ofTokyo 2005.
Kaneko, M. “ Financial Assistance to Students in Japan. ” International Symposium on Worldwide
Perspectives of Financial Assistance Policies. December 6-7, Tokyo 2006.
Kobayashi, M. and Kambara, N. “ Equity and Cost-Sharing in Japanese Higher Education. ” Presentation
to the conference on Worldwide perspectives of ﬁnancial assistance policies. Tokyo International
Exchange Centre 2006.
McInnis, C. and Hartley, R. Managing work and study. Canberra: AGPS 2002.
McInnis, C. ( In press ) . University students' experiences of higher education, in International
Encyclopaedia of Education, 3rd Edition, Elsevier.
Norton, A. “ HELPless: How the FEE-HELP loans system lets students down and how to ﬁx it. ” Issue
Analysis. The Centre for Independent Studies. No.68 February 2006. (www.cis.org.au.)
OECD. Thematic Review of Tertiary Education, Country Background Report, Australia. DEST,
Canberra, April 2006.
PhillipsCurran and KPMG. Independent Study of the Higher Education Review (Vol 1) MCEETYA,
2002.

81

6. “ THE CHANGING NATURE OF STUDENTFUNDING POLICIES IN BRITAIN ”
Professor Claire Callender(London South Bank University)

INTRODUCTION
This paper focuses on Britain's higher education system of student ﬁnancial aid. It questions whether
the system facilitates or hinders access, and is equitable. It concentrates on provision for full-time
undergraduates in England. Financial support for part-time undergraduates and postgraduate students isvery different compared to the help available to full-time students, as is student funding elsewhere in the
UK because, since devolution in the late 1990s, Scotland and Wales have developed their own student
funding programmes.
The current British government wants to expand higher education and this is now symbolised bytheir pledge to increase the participation of young people in higher education to 50 per cent by 2010. It
also is committed to widening accessibility to higher education and in broadening the groups of people
going to university, especially students from low-income families (DfES, 2003a; DfES 2003b). It aims
to tackle the reality that young people from professional families are over ﬁve times more likely to enter
higher education than those from unskilled backgrounds, and even when they have similar qualiﬁcations,
are more likely to attend the best universities. This commitment is driving the government's higher
education policies. It arises from the need for universities to meet the demands of a globalised knowledge
based economy and a desire for social justice and social inclusion. Britain's student assistance policies,
therefore, incorporate two types of funding models outlined by Professor Kobayashi and Professor
Kambara - the pragmatic and social activist models. Moreover, the main policy mechanism used for both
funding and promoting widening participation has been the reforms of student ﬁnancial support.
This paper will start by brieﬂy summarising some key features of Britain's higher education system,
to contextualise her student ﬁnancial assistance policies. Then it will outline the main changes in student
funding and support policies since the 1990s, and explore the impact of these changes on students to
date.

BRITAN'S HIGHER EDUCATION SYSTEM
There are some signiﬁcant differences between the Japanese and British higher education systems.

83

Britain, reflecting its smaller population, has far fewer universities and students than Japan. There
are only 132 universities and colleges of higher education in England and 169 in the whole of the UKwith around 1.8 million undergraduates. There has been a steady growth both in the number of higher
education students and the proportion of young people attending university. The most pronounced riseoccurred in the mid 1980s and early 1990s, so that today around 30 per cent of young people in Englandand Wales participate in higher education. Women now make up over half of the student population
and around a ﬁfth of full-time undergraduates are aged 21 or over at the start of their course. Unlike
Japan, all universities in the UK are public and funded directly or indirectly from central government,
except for one university that is very small and caters primarily for overseas students. Consequently,
the private higher education sector in Britain is insigniﬁcant. However, the higher education system isvery hierarchical with entry based on academic ability and research funds concentrated in the top ten
universities. Competition for places at these top universities is high and these universities can afford tobe very selective in their intake of students. For other universities lower down the hierarchy, recruiting
students is more of a concern.

CHANGES IN STUDENT FUNDING POLICIES
Between 1962 and the late 1980s, there were few signiﬁcant changes in full-time student funding andsupport policies. Undergraduates' tuition fees were paid by the state, but students received means-tested
maintenance grants and social security beneﬁts for their living costs. The means-test was based on theincome of a student's parents or on the student's own income if they were aged 25 and over, and this has
been the basis of means-testing in all subsequent student grants and loans. In addition, students' parents
were expected to contribute to their child's living costs of at least up to the maximum grant available.
Student loans for living costs were ﬁrst introduced throughout the UK in 1990 by the Conservative
government. They were made available to all full-time undergraduates, irrespective of their means, at azero real rate of interest, and thus were heavily subsidised by the government. These ʻ mortgage style'loans were repaid usually over a ﬁve-year period after students completed their course, but only once
graduates were earning 85 per cent of national average earnings. If they earned below this threshold theirloan repayments were deferred. Thus unlike Japan, both the eligibility criteria for the receipt of student
loans and the loan interest rates were the same for all students. Student loans were made universallyavailable to all students irrespective of their family income and academic ability. In addition, in 1990,
maintenance grants were frozen and students' eligibility for social security beneﬁts was severely limited.
The system of student grants for living costs, which student loans gradually replaced, was originallydesigned in the early 1960s when only around six per cent of young people attended university. By
the late 1980s, higher education had expanded rapidly and participation more than trebled. However,84universities' income from central government did not rise in line with this expansion and was inadequate
to meet the increasing costs associated with a growing student population. Student loans, therefore, wereintroduced as a way of saving money for the government because they were cheaper to fund than grants.
The money saved through student loans could then be passed on to the expanding higher education
sector. In fact, all the changes to student ﬁnances since 1990, especially since 1997, have been driven
primarily by a desire to reduce public expenditure on higher education while at the same time raisingmore money for universities to fund greater and wider participation.
The underlying rational behind the introduction of loans, set out in the 1988 White Paper Top-Up
Loans for Students (Cm 520), has been repeated ever since in various documents in relation to loans,and latterly tuition fees. The idea of raising additional funds to meet increasing higher education costs
through more contributions from students' parents or taxation was rejected. Instead, the arguments
were based on the principle that those who beneﬁt from higher education, should pay towards its costs.
Society benefits by gaining highly skilled people essential to a modern economy and society, and soshould pay the greatest share. However, students, once they graduate, also beneﬁt in terms of good jobs,
better employment prospects and enhanced earnings, so they too should contribute towards the costs of
their education.
The Labour government introduced its first set of changes to student support arrangements in the1998 Teaching and Higher Education Act. The aim of these reforms was to generate more income for thesector because of years of under-investment under the Conservative government. In addition, funding thewidening participation agenda was central to these changes. The 1998 Higher Education and Teaching
Act introduced a ﬂat rate means-tested tuition fee of £1,150 (¥267,600) a year paid up-front primarily
by students' parents. The Act also abolished cash grants for living costs and replaced them entirely
with student loans. Students loan were also partially means-tested for the ﬁrst time– so poorer students
received more generous loans than wealthier students. However, all students still could get a student
loan and all students paid the same interest rate on their loans. In addition, the Act established a different
student loan repayment system which was linked more directly to students' income once they graduated.
This was achieved by abandoning the mortgage style loans and replacing them with income contingent
loans which were repaid via graduates' pay packet and the tax system. In reality, this meant that
graduates with incomes over £10,000 a year (¥222,700) had to pay an additional 9% in tax, until they had
paid off their loan. However, the interest rate on loan remained unchanged and was linked to inﬂation.
The loans were administered by the Student Loans Company which is a quasi government organisationand very similar to JASSO. However, they no longer had to collect the loan repayments as this is done
through the tax system which also was a means of reducing repayment default levels.

85

The next major changes in student funding were incorporated into the 2004 Higher Education Act andproved highly controversial. They only applied to students in England and came into force in 2006/07.
The reforms signal a radical shift in student ﬁnances. They have deregulated undergraduate tuition fees
and introduced a quasi-market in higher education. Universities now can charge up to a maximum of£3,000 (¥ 668,044) for any undergraduate course. However, all students, irrespective of their family's
income, now pay tuition fees. So, means-tested ﬂat rate tuition fees paid up front were replaced withdeferred fees repaid after graduation via an optional student loan. Consequently, students now can takeout a loan for both their living costs and their tuition fees. The repayment threshold for these loans andthe existing maintenance loans was increased to £15,000 a year (¥3,355,946). The loans for tuition fees,
like loans for living costs are zero rated and will be collected in the same way as maintenance loans.
They are designed to cover students' fees in full, except for low income students who receive bursariesof £300 from their university (see below). Consequently, poorer students can borrow up to £2,700,
while their wealthier peers who are ineligible for mandatory bursaries can borrow up to £3,000. It is
anticipated that the take up of loans for tuition will be around 80 per cent.
In addition, various changes were initiated specifically to support students from low-income
backgrounds. First, a means-tested grant of up to £2,700 (¥601,100) was re-introduced. Full grants
are paid to students from households within incomes of £17,500 or less (around ¥4 million), which
represents about 7/8 of Britain's median household income. Secondly, student debt is to be written off
after 25 years which is an important safety net for low earning graduates, and especially for women withinterrupted patterns of labour market participation due to childbearing and rearing. Finally, universities
charging the maximum tuition must give low-income students non-repayable bursaries of £300 (¥67,108)a year to supplement their state-funded grants and maintenance loans.
On top of this mandatory minimum, the government has encouraged universities to provide additional
discretionary ﬁnancial support to promote widening participation. This is a new development in England.
For the ﬁrst time in over 40 years universities are expected to contribute to the student ﬁnancial support
from the income they generate from tuition fees. But expenditure on these bursaries is very small
compared with the costs of grants and loans funded through central government. The current sources ofstudent assistance are summarised in Figure 1.
All these changes in student funding reflect an ongoing cost-sharing agenda arising from financial
austerity (Johnstone, 2006). They are transforming who shoulders the costs of higher education and areshifting the costs of higher education from government and taxpayers to students, and from students'
families to students themselves. It is far too early to assess the impact of the most recent changes instudent funding which were only introduced in 2006/07. However, potentially lessons can be learnt fromearlier reforms. It is to these that we now turn.

86

Figure 1 Student Finances in 2006/07
Discretionary bursary

CashStatutory bursary
Max £300
Student grantMeans-tested

Max £2,700
Maintenance Loan
Max £4,510
London £6,315

Repayable
Transfer

Tuition fee loan
Max £3,000

THE IMPACT OF CHANGES IN STUDENT FUNDING BETWEEN 1990 AND 2006
Student loans and debt
The phasing out of grants and their replacement with student loans to cover students' daily living
expenses between 1990 and 2006 has lead to a very radical restructuring of students' incomes (Figure 2).
Figure 2 clearly shows that the proportion of students' total income derived from student maintenanceloans has increased over-time while their income from grants has fallen. In 2004/05, student loans formed
two ﬁfths of students' total income compared with under a third in 1998/9 (Finch et al, 2006; Callenderand Wilkinson, 2003). This is because more students are taking out maintenance loans and borrowing
larger sums of money. In last decade loan take-up has doubled. Today 81 per cent of students take out amaintenance loan, a much higher proportion than in Japan. The average size of the loan has increased
ﬁvefold in the past decade and now stands at £3,730 (SLC, 2006).
Student maintenance loans make up the majority of all students' borrowings. Inevitably, with more
students taking out loans and borrowing larger sums, student debt has escalated. Some 92 per cent ofstudents graduating in 2005 anticipated leaving university with debts compared with 81 per cent in 1999.
Their average debt was also higher- nearly three times more than those who graduated in 1999. By 2005,
students were graduating with an average debt of nearly £8,000 (¥1,762,233) (Finch et al, 2006; Callenderand Wilkinson, 2003). However, debt is unequally distributed. Students who are poor before going
to university are more likely to be in debt and to leave university with the largest debts, while betteroff students are less likely to have debts and leave with the lowest debts. In 2005, the poorest students

87graduated with average debts of £9,842 (¥2,190,960), 42 per cent more than the richest students.
Thus, student debt is a social class issue. Poorer students have to take more responsibility personallyfor the costs of their education, and far more responsibility than wealthier students do. Therefore, thestudent support policies, in effect, have been regressive because poorer students have had to pay - via
their loans - relatively more towards the costs of their education.
Figure 2 Changes in the composition of student income 1988/89 to 2004/05
45

40

35

30

25

20

15

10

5

0

1988/9

Grant
Gifts

1992/3

1995/6

1998/9Parents
Credit2002/3Student loan
Savings

2004/05

Work
Other

Source: Derived from Callender and Wilkinson, 2003 and Finch et al, 2006
Students exhibit a complex web of attitudes towards money and employ a range of strategies toavoid accumulating debt. However, there is mounting evidence that concerns about debt can put off
prospective students from going to university. Several studies cite fear of debt and the prospects ofbuilding up large debts, particularly student loan debt, as a deterrent to university entrance among
qualiﬁed students, especially from low socio-economic groups (Forsyth and Furlong, 2000; Connor et al,
2001; Archer et al, 2003; Forsyth and Furlong, 2003). A recent study found that debt averse students wereﬁve times more likely not to go to university than those with more relaxed attitudes to debt (Callender
and Jackson, 2005). Fear of debt was greatest among students from the lowest social classes, and put
them off going to university more than the better off, even when controlling for a range of other factors
including academic ability. Moreover, this debt aversion could not be subsumed within class-related predispositions to higher education. It was a deterrent in its own right. Fear of debt particularly deterred
low-income students undertaking vocational qualiﬁcations but not those taking academic qualiﬁcations(A Levels). These would-be students' debt aversion has serious implications for the government because
these low-income students are at the heart of their widening participation policies.

88These UK findings on debt aversion may be important for Japan. Clearly, attitudes towards debt
and debt aversion are culturally speciﬁc. It would be interesting to understand the nature of Japanese
students' attitudes to debt and the extent to which the low take up of student loans in Japan is related to
debt aversion or other factors, and which student groups hold particular views about debt.
Family support
Another shift in students' income since 1988/89 is the fall in financial support from their parents(Figure 2). This fall has been most marked among students from the highest social classes (Callenderand Wilkinson, 2003). Since 1998/99, their income from their family fell by 20 per cent in real terms
but was largely made up by an 18 per cent increase in income from student loans. By contrast, students
from the lowest social classes saw their income from their family rise by two per cent while their income
from student support rose by just four per cent. Therefore, the poorest students have lost out. The main
beneﬁciaries of the move from grants to loans were wealthier students: student loans were a subsidy for the
middle classes. These changes are completely contrary to the government's commitment to redistributethe costs of higher education in a fair and equitable way and to give support to those who need it most
(DfES, 2003a). And again, this is regressive because the real value of student support has risen for thewealthiest students but fallen for the poorest.
Paid work
A further shift in students' income since 1988/89 is their increasing reliance on paid work. This isa direct consequence of the abolition of grants and the introduction of tuition fees. More students areworking in term-time than ever before and they are working longer hours. Between 1998/99 and 2004/5,
the proportion with term-time jobs increased from 47 per cent to 58 per cent, when they worked anaverage of 14 hours a week (Callender and Wilkinson, 2003; Finch et al, 2006).
Consequently, their earnings form a much higher share of their total income. This is another exampleof how the costs of higher education have shifted more on to individual students. However, again thiscontribution is greater for students from low-income families than their most afﬂuent peers, as they are
more likely to engage in term-time employment and to work the longest hours (Callender and Wilkinson,
2003). So, employment is another social class issue
Students reap few benefits from working because they are concentrated in unskilled and very low
paid jobs, earning well below national average wages. Instead, they trade time studying for money,
undermining their academic performance, depressing their ﬁnal degree results, and putting at risk theirsuccessful course completion. For example, recent research (Van Dyke et al, 2005) shows that students
who work in term-time obtain poorer degrees results than those who do not work do, and the more hours
they work the greater the detrimental effect. For instance, a student working the average number of hours

89

a week is a third less likely to get a good degree result than an identical non-working student. Again,
the poorest and most disadvantaged students are the hardest hit because they are the most likely to workin term-time. Term-time employment, therefore, compounds and increases existing inequalities among
the student population: it has the most negative affect on those already at a disadvantaged within higher
education.
The 2004 Reforms – the unintended consequences
It is too early to tell what the impact of the changes introduced in 2006/07 by the 2004 Higher
Education Act will have on students, universities, and the higher education sector overall. However,already it is possible to see some unintended consequences of the 2004 Act which bring this into question
the rationale behind the 2004 reforms.
The purpose of these reforms was to advance the marketisation of higher education. Competition was
the leading logic behind the reforms. The aim was to stimulate more competition between institutions toincrease efﬁciency, drive up quality, and to give students greater choice. The key mechanism for creating
this competitive market was variable tuition fees. However, contrary to the government's intentions,
there is no market in fees: fee levels remain undifferentiated. Currently, all but four universities arecharging the maximum fee of £3,000 for a bachelor's degree and none, are charging zero. The new“ maximum ” tuition fee has turned out, in effect, to be a revised ﬂat-rate fee that the new variable fee wasdesigned to replace.
However, competition between universities is emerging in relation to extra-statutory bursaries andscholarships. There are stark disparities both in the amount of money universities are investing in thesebursaries, and in the nature and scope of the support, they offer. For example, universities are spending
anything between 11 to 78 per cent of their new tuition fee income on bursaries and access. In addition,
the generosity of bursary schemes ranges signiﬁcantly from the mandatory minimum of £300 (¥67,108)
to £5,000 (¥1,184,620). Consequently, there is a considerable difference between, what the Americans
call, the ʻ sticker price' of £3,000 tuition fees and the discounted price, that is, the tuition fee minus thevalue of any bursary. And this difference varies from one university to another. In other words, via theback door of bursaries we are seeing some tuition fee variation.
Competition between universities resulting directly from the new funding regime now revolves aroundtheir bursary schemes and policies, and will continue to do so until the cap on tuition fees is lifted.
These policies can assist universities' institutional repositioning in the higher education marketplaceand be used as a competitive strategy – since this is where universities have the greatest discretion andopportunities for innovation. For some universities, bursaries are an investment, a means of opening up

90

opportunities to the brightest and the best. For others, they are a cost, a means of maintaining student
numbers.
Over and above the statutory minimum bursary of £300, it is up to each university to decide
their bursary eligibility criteria and how much to award. This adds to the complexity of an alreadycomplicated student funding system. The discretionary, non-standardised nature of these bursaries andtheir diverse eligibility criteria may be advantageous to universities but not necessarily to students. The
bursaries are not an entitlement, unlike all other government funded student support, so students haveto apply for support. However, some are not applying. They do not know about them, think they are
ineligible, or are deterred by their complexity because information is unavailable, or unclear and poorly
presented. A recent government survey showed almost two-thirds of young people were unaware that
universities and colleges were offering bursaries. The net result is that the take-up of bursaries in 2006/07
was poor in some universities. This is an inevitable consequence of a discretionary system of student aid.
Another is that some applicants did not know if, and how much, they would receive before starting theircourse which made ﬁnancial planning (something the government is encouraging students to do) – very
difﬁcult. Moreover it has yet to be seen if the size and variety of the bursaries on offer are sufﬁcient toinﬂuence students' choices and behaviour.
Overall, the 2004 reforms already have proved very costly to the Exchequer and taxpayer, and in theirpresent form probably are not sustainable in the long-term. Student loans (for maintenance and fees) arevery heavily subsidised by the government because of their low interest rate and because outstanding
student loan debt is cancelled after 25 years. It has been estimated that for every £100 a student borrows
it costs the taxpayer around £42 (DfES, 2004). Moreover, not all of this considerable subsidy is targetedat those most in need. Some of it is going to students from wealthy families because all students cantake out loans. This raises the question of whether limited government resources should be focused moreon those in need of financial help, and whether wealthier students or their parents should contribute
more to the costs of their education. However, the new grants do mean that students from low-income
families get more state support than students from higher income families while the writing off of debt
will beneﬁt poorer graduates. In other words, some of the more regressive features of the student support
provision introduced following the 1998 Teaching and Higher Education Act have been remedied by the2004 Education Act.
The Treasury is putting much more money (around £1.2 billion a year more) into higher education
as a result of the grants and tuition fee loans. This will only be gradually recovered and never actually
recovered in full, because of the student loans' low interest rates and the writing off of debt. It isquestionable, therefore, the extent to which the costs of higher education following these reforms, in91

reality, have shifted from the public to the private purse. Now individual students, or more accurately
graduates, are paying more towards the costs of their education. But taxpayers are also paying more too
because of their increased share of the costs of student support. In fact, some commentators suggest,that the additional money raised from tuition fees is off set by the extra costs to the taxpayer of boththe student loans and the new maintenance grant. Consequently, we still have a mass higher education
system funded predominantly as a public service through taxation.
If the government wants to introduce greater competition in higher education through tuition fees andmore of a market, then the costs to the taxpayer of tuition fee loans raise signiﬁcant issues for the future.
Problems will arise if ﬁrstly, tuition fee loans continue to be non-means tested; secondly, fees are stillfunded via low-interest student loans; thirdly, the loan repayment threshold remains at its current level;
and fourthly, the current cap on tuition fees is lifted after the new funding system is reviewed in 2009/10.
Speciﬁcally, the cost of lifting the cap above £3,000 will be considerable for the Treasury because offee deferral. Moreover, if the cap was lifted, the universities charging the highest fees would be themost prestigious. These are the universities with the smallest proportion of students from low-income
backgrounds and the highest proportion of students from wealthy backgrounds. Consequently, a greater
share of government tuition loan subsidy would go to students from the wealthiest backgrounds. This
would be highly regressive. Currently, this is not an issue because tuition fees remain undifferentiated.
However, it will be a major concern if there is greater fee differentiation and a real market in feesdevelops in the future, as the government had originally intended. So, although some people may think
the issue of fees has been decided in England, in fact it has not. We can expect further changes to fees
and how these are ﬁnanced in the medium term.

CONCLUSIONSThe unintended consequence of the 1998 student support reforms was to create greater inequalities
with poorer students losing out. Now students pay for their education by taking out loans and doing paid
work while they are studying. Money from their families is less signiﬁcant. And it is poorer students
who shoulder a larger share of the costs. It is unlikely the government's latest reforms will reverse this,or lead to widening participation. Variable fees increase both the costs of higher education for students
and their debt: both deter low-income groups' participation in higher education. The new grant, while
welcome, is inadequate to offset both rising costs and debt. And, the student funding system is becoming
more complex than ever before – which in turn may act as a barrier to participation. Rather there is adanger that the new reforms will reassert elitism in higher education. Privileged students who populate
top universities will pay high fees but will get highly valued degrees. Low income and access students
who populate universities at the bottom of the hierarchy may pay a bit less but will get less and still end
up with large debts. These divisions between institutions and between students reinforce both social

92

class and disadvantage. There is a danger that higher education will become more socially and ethnicallydifferentiated and polarised than ever before.

Archer, L. Hutchings, M. and Ross, A (eds.) (2003)Higher Education and Social Class: Issues of
exclusion and inclusion Routledge Falmer, London
Callender, C., (2003) Attitudes to debt: School leavers' and further education students' attitudes to debt
and their impact on participation in higher education, Universities UK, London 185 pp
Callender, C. and Jackson, J (2005) Does Fear of Debt Deter Students from Higher Education? Journalof Social Policy Vol 34/4 pp 509-540
Callender, C and Wilkinson, D (2003) 2002/03 Student Income and Expenditure Survey: Students'
income, expenditure and debt and changes since 1998 Research Report No 487, Department of
Education and Skills, Nottingham, pp148
Connor, H., Dawson, S., Tyers, C., Eccles, J., Regan, J., and Aston, J. (2001) Social Class and Higher
education: Issues Affecting Decisions on Participation by Lower Social Class Groups. Research
Report RR 267, Department for Education and Employment, London
DfES (2004) The Higher Education Act: Regulatory Impact Assessment DfES, London
DfES (2003a) The future of higher education. Department for Education and Skills, Cm 5735
DfES (2003b) Widening Participation in Higher Education, Department for Education and Skills,
LondonFinch, S., Jones, A., Parfrement, J., Cebulla, A., Connor, H., Hillage, J., Pollard, E., Tyers, C., Hunt, W.,
and Loukas, G. (2006) Student Income and Expenditure Survey 2004/05, Research Report RR725,
DfES, Nottingham
Forsyth A and Furlong A (2000) Socio-economic disadvantage and access to higher education Policy
Press/JRF, Bristol
Forsyth A and Furlong A (2003) ʻ Access to Higher Education and Disadvantaged Young People' British
Educational Research Journal 29:2 pp 205-222
Johnstone, D.B. (2006) Cost-sharing and the Cost-effectiveness of Grants and Loan Subsidies to Higher
Education in Teixeira, P.N.; Johnstone, D.B.; Rosa, M.J.; Vossensteyn, H. (Eds.) Cost-sharing andAccessibility in Higher Education: A Fairer Deal? Springer, Dordrecht
SLC (2006) Student Support for Higher Education in England Academic year 2006/07, SLC SFR 03/2006,
Student Loans Company, Glasgow, November
Van Dyke, R. Little, B. and Callender, C. (2005) Survey of higher education students' attitudes to debt
and term-time working and their impact on attainment , HEFCE, Bristol,169 pp

93

7. Student ﬁnancial aid in Finland
Timo Aarrevaara(Research Director, PhD, Higher Education Group, University of Tampere, Finland
Visiting Professor in the Center for National University Finance and Management, Tokyo )The welfare aspects of Finnish society have been built on education, culture and knowledge, and all
children are guaranteed opportunities for study and self-development according to their abilities. This
principle applies, irrespective of their place of residence, language and ﬁnancial status (MinEdu 2006c).
These lofty principles are very strong in Finnish public administration.
In 2006, there were 20 universities in Finland, of which 10 were multi-faculty universities, three were
universities of technology, three were schools of economics and business administration and four were
academies for the creative and performing arts. All Finnish universities are state run and receive theircore funding from the state budget. In 2005 there were about 136,700 undergraduate students in the
Finnish university system, and about 20,600 postgraduate students (source: KOTA 2006). In polytechnics
there were about 131,200 students on degree programmes (source: AMKOTA 2006). The extensive
higher education system in Finland including the polytechnics offers in principle degree study places inhigher education for about 65 % of the each new age group.
The structural redevelopment of higher education institutions in Finland is in progress and cooperation
has increased rapidly over the past few years. This is manifest in common education projects between
universities and polytechnic institutions and in closer regional cooperation. The Finnish universities
and polytechnics are also rapidly internationalising and their readiness to respond to international
competition has increased throughout the 2000s. The conditions for structural changes to rectify the
deficiency in funding are there when political decision-making is ready to take the step. First three
mergers are carrying out in polytechnics sector in 2006-2007 and mergers of universities are expected tocarry out in 2008 (Minedu 2006 a, b, c).
In both Japan and Finland, the populations are ageing and the number of 18-year-olds in the population
is declining – while the total population was growing in Finland in 2006. As a consequence, the sizeof the higher education sector in Finland is the subject of discussion, including the number of higher
education institutions in the country. Due to changes in employment practices over the past decade, anincreasing number of tertiary education graduates are unable to find lasting and steady employment
concerns both Japan and Finland. In the long term this will affect students' motivation to access tertiary
education programmes in those ﬁelds of study with poor employment prospects.

95Investments in knowledge and skills are at the heart of economic growth in the OECD countries, as
the OECD has attributed to rising labour productivity half of the GDP per capita growth from 1994 to
2004. According to the Education at a Glance 2006 analysis, private returns show a rate of return above
8% for tertiary education in all countries. This return has been calculated by comparing future earnings
prospects with the private cost of studying, and these numbers are generally higher returns than at theupper-secondary level. (OECD 2006a)
The differences between Japanese and Finnish higher education can be understood by looking at
education as consumption. In Japan education is private consumption, but not in Finland. Higher
education as public good is important value for European higher education (de Wit 2005, 147). Thisaffects the conditions under which the government will guarantee access to higher education by
supporting students ﬁnancially.
It is typical of the Finnish higher education system that the number of non-degree students is quite
high, due to university extension studies centres and traditional summer university organisations' activerole. In Japan the share of part-time and non-degree students is clearly smaller than in Finland, but inboth countries the need for lifelong learning is increasing. Still, in the Nordic countries life-time earnings
from higher education degrees are relatively low, although in Finland they are higher than in Sweden(OECD 2006a, Indicator C2). Graduate employment levels in the public sector is historically high in all
Nordic countries. Therefore higher education is perceived as public rather than private consumption.

Discussion on tuition fees
The Commission of the European Community strongly promoted tuition fees in its Communicationfrom the Commission to the Council and the European Parliament on 8 th September 2006. The
communication Efficiency and equity in European education and training systems ” made thefollowing observation:“ A common assumption has been that a ʻ free' system of higher education (one funded entirelyby the state) is, of itself, equitable. In fact, this assumption has not been borne out by reality,
since the main determining factor in participation is socioeconomic background. The bulk ofevidence shows that there are usually significant private returns to those who participate inhigher education, and that these are not entirely offset by progressive tax systems. This can havea reverse redistribution effect. This regressive effect is particularly acute where school systems
exacerbate the effects of socio-economic background on educational attainment. In order tobring about a more equitable balance between the costs funded by individuals and society andthe beneﬁts accrued by each, and to contribute to providing universities with the extra funding96

they need, many countries are turning to the main direct beneﬁciaries of higher education, thestudents, to invest in their own futures by paying tuition fees. Evidence also suggests that themarket effects of tuition fees may improve the quality of teaching and management in universities,
and reinforce student motivation. ”
COM (2006) 481, 8th Sep. 2006
This critique runs contrary to tuition fee policies in the Nordic countries, as non-EU/EEA-students pay
tuition fees in Danmark since 2006. In Finland, higher education institutions ability to collect any student
contributions is limited, and for example, the Act on Criteria for Charges Payable to the State limits thehigher education institutions' ability to demand mandatory contributions. Discussion is now focused on
introducing tuition fees for non-EU international students. The student organisations in Finland consider
them deliberately misleading a “ red herring question ” – a step towards tuition fees for all students. The
student organizations are therefore opposed to any tuition fees in Finland.
The OECD thematic review on tertiary education 2006 found that tuition fees are unlikely to have asigniﬁcant impact on the overall balance of public and private resources in the Finnish tertiary system.
They would rather affect the incentives motivating university and polytechnic institutions, providingthem with stronger incentives and resources with which engage in the targeting and recruitment of
non-EU students. The government has also instigated discussions on permitting tertiary educations
institutions to offer teaching on degree programmes partly ﬁnanced by employers.
In Japan, the government sets goals to ensure that there will be learning opportunities for students
by maintaining and improving the conditions for teaching and research. One tool which can be used towork towards this is to provide support for students. There are two ways to achieve this goal. First, there
is support for higher education institutions as institutional support. Second, students can be looked afterwith individual support. In any higher education system, there must be an appropriate balance between
these goals (MEXT).

Student Grants in Finland
There has been a long tradition of support through private and public student grants in Finland in theth

19 and 20th centuries. A system of state guaranteed study loans system was established in 1959. The
Centre for Student Financial Aid was founded in 1972. It was an organisation established for a modern
student ﬁnancial aid system for Finnish students in tertiary education. According to legislation enacted
in 1994, student ﬁnancial aid is to be provided by the Social Insurance Institution of Finland (KELA),
which evaluates the needs of students according to eligibility criteria, taking into account students'

97

income and state subsidies.
In the European Union, the term ʻ student' refers to a person who is enrolled at a higher education
institution and who pursues higher education studies which lead to a recognised degree or otherrecognised tertiary level qualiﬁcation up to doctoral level, regardless of ﬁeld of study. All the degree
students in Finnish tertiary education can benefit from publicly financed study grants and housing
supplements. The aim is to provide sufﬁcient income and to provide the incentive for students to commit
to graduating in a planned time.
The total sum of student financial aid is also dependent on the type of institution, age and marital
status of the student, and the mode of accommodation. The housing supplement covers 80 percent of therent, but it is not granted for rents over EUR 252 per month (in 2006).
The maximum period of eligibility for this form of support is 55 months, but the time depends on thetarget completion time length of a degree. Students can apply for an extension in some cases.

Table: The basic monthly study grant (in EUR, Source: KELA 2006).
Universities, Polytechnics and continuing education centres of Universities (in EUR)
259,01 (about 38600 Yen)

Student
1.
2.
3.
4.
5.
6.

is married or has dependents
Lives alone, aged 20 or overLives alone, aged 18-19
Lives alone, aged under 18
lives with his or her parents,
aged 20 or over

259,01 (about 38600 Yen)
259,01 (about 38600 Yen)
126,14 (about 18800 Yen)
105,96 (about 15800 Yen)

lives with his or her parents,
aged under 20

38,68 (about 5800 Yen)

The basic monthly study grant can be reduced in cases 4-6 described above. Conversely, study grants
can be increased if the taxable annual income of students' parents is less than 26100 EUR (about 39
MYen). All sums presented here are pre-tax. The amount for income other than the study grant andhousing supplement is 505 EUR (about 75200 Yen) per month and 1515 EUR (about 226000 Yen) for
ﬁnancial aid-free months.

98

Recent reforms in student ﬁnancial aid in Finland
In Autumn 2005 the maximum sum of the state-guaranteed loan for higher
education was increased from 200 EUR to 300 EUR per month, and the
maximum loan for students studying abroad from 360 to 440 EUR per
month.
Tax relief can be granted to those who graduate in the minimum time
speciﬁed in the legislation. The reduction in such cases would be 30% on
loans exceeding 2500 EUR.
The housing supplement covers 80 percent of housing expenses. The
maximum monthly allowance for housing expenses was increased to 252
EUR (about 38500 Yen) from 1.11.2005
Source: MinEdu 2006

The Government also guarantees student loans of up to 300 EUR per study month or 440 EUR for
Finnish citizens studying abroad aged at least 18 years. Students must arrange the loan with the privatebanking sector. The period for re-paying the loan is twice the period over which the loan was taken,
and the maximum repayment period is 14 years. Students and the private banks negotiate between
themselves all other conditions such as interest, repayment and other terms and conditions which will
applying to the loan.
The total sum of student loans in private banks has remained about the same during the 2000s as thenumber of students is growing and there has been no remarkable change in interest rate (Sources: Bankof Finland 2006 and KOTA). This fact tells us that students in the 1990s and 2000s avoid loans more thanthey did in the 1980s.
A conventional form of loans is mortage type based on a deﬁned rate of interest, repayment period
and repayment mode. Some countries are in favour of income-contingent loans (ICL), which carries acontractual obligation to repay some percentage of future earnings. However, many countries combine
these types with hybrid versions (Johnstone 2006, 152-153).

The low level of study loans
In Finland, all study loans will eventually be paid back, because they are not ICL's but mortage-typeloans. The exception to this rule is for new students who commenced higher education in the academic
year 2005-2006 or later. They are eligible for a student loan tax deduction if they complete their studies

99within the usual time frame and have an outstanding higher-education debt of more than €2,500 at theend of the term in which they complete their studies (amendment to the Income Tax Act 409/2005). This
opportunity for new students has not produced a radical increase in the number or amount of loans takenout by students.
Total sum of study loans taken from private sector banks and their average interest %.

@31
AugustTotal
sum in1000
Milloin
EUR

Interest %

2003

1.41

4.06

2004

1.37

3.81

2005

1.39

3.70

2006

1.4

4.19

This system is expensive, since a growing amount of students enter tertiary type A programmes inFinland, as was shown in Indicator C2 in Education at a Glance (OECD 2006a). However, the student
financial aid system applies only to Finnish citizens. Only non-citizens who live in Finland on apermanent basis for purposes other than studying, can beneﬁt from student ﬁnancial aid in Finland. Also,
the Centre for International Mobility (CIMO), an organisation operating under the Ministry of Education
Finland offers services and expertise to encourage crosscultural communication. It administers about1000 scholarship and exchange programmes available to Finnish and foreign students.
At the moment there are more foreign students coming to Finland than there are Finns goingabroad. Finland could increase the number of foreign students and in this way support countries where
the university structures are not sufficient to meet the demand. The demand for higher education isdeﬁnitely growing in some ﬁelds of study but there are others where decline is evident. This is a naturaldevelopment of changes in demand, and public universities have a history of inability to respond swiftlyto these changes.
Although the age groups are becoming smaller, the proportion of those matriculating in eachage group over the next 10 years will continue to grow in Finland. In fields where the demand for
education is growing it is possible to establish publicly funded programmes. There are, however, twomajor restrictions on their use. Firstly, experiences from the outcome of extensive programmes are
partly negative as the results of the training have been modest (Aarrevaara & Kivistö 2006). Secondly,
universities cannot increase their capacity according to the changing demands in the labour market and,100

therefore, the use of foreign training programmes creates new opportunities to provide flexibility ata lower cost than by expanding the university institution. Hence it is also in the tax-payers interest to
support studies abroad.
Students use their ﬁnancial aid to cover living costs, and the Finnish legislation does not permit tuition
fees to be charged to degree students. This is due to the principles of the welfare state enshrined in the
Finnish Constitution, including regulations relating to the provision of free education to all students
studying for a degree. On the one hand, for international students, the absence of tuition fees might bea reason for studying in Finland. On the other hand, there is evidence to conﬁrm that the combinationof fees and loans has not impaired access to higher education. An Australian study is a reﬂection of thelatter. Participation can continue to grow and not decrease the participation of students from low-income
families (Greenway & Haynes 2004, 317).

The Experiences of Erasmus Mundus
Inﬂexible ofﬁcial structures and the strong legislative foundation of the organisation restrict Finnish
universities' capacity to make rapid changes. The heavy cost structure weakens the opportunity to act in
response to the market or to take ﬁnancial risks. The setting up of the European Higher Education Area
(EHEA) requires improved competitiveness by the universities in that they have to compete for students
and researchers. Increasing economic autonomy is necessary for Finnish universities to enable them tomaintain their current levels of operation in the changing environment.
The Erasmus Mundus Programme (EM) is an example of new tools for enchancing EHEA. EM is a
co-operation and mobility programme launched by the EU Commission in 2004. Its aim is to enhance
the quality and attractiveness of European higher education worldwide by identifying, recognizing
and supporting high-quality EM Master's Courses. EM provides a framework for promoting valuable
exchange and dialogue between cultures and aims at strengthening EU and third country (countries
outside the EU/ETA zone ) co-operation in higher education. EM financial envelop in the EU
Commission is 230 M € 2004-2008. In the operations of EM programme there is competition between
Erasmus Mundus Courses of outstanding academic quality, in each the minimum is 3 partners and there
is no formal maximum for number of networked higher education institutions.
In Japan, the universal access to higher education is accomplished by expanding scholarships
for students, rather than subsidizing national universities (Yamamoto 2004, 162). The Erasmus
Mundus programme is an example of a similar steering shift from national institutional support toEuropean competitive based support. Non-European students who participate in EM Master's courses
can apply for a EM scholarship awarded to the best students on a competitive basis. These scholarships

101

cover travel and living expenses as well as tuition and its amount is 21000 € a year (about 3,2 MYen ayear). Some of the universities in Europe are able to charge tuition fees. Finland refers only to the GATS
“ Consumption abroad ” alternative, and reguires not tuition fees from overseas students. In 2007 politicalpressure to change the non-fee-paying policy for students outside EU/EEA is inevitable in Finland.

More International Policy for Contributions
If Finland is genuinely seeking to universally provide higher education, it is unrealistic to assume
that within the university sector the publicly funded universities alone could realize it. If the universities
take in significantly higher numbers of students, domestic or foreign, they must abandon some of
their research resources and this would probably mean that they would neglect their social task of
information transfer. Over the past decade the growth of the university sector has materialized throughstate subsidies. The growth of budget expenditure for the whole university sector in Finland has been
65 % between the years 1995 and 2005 and this development is based on Parliamentary Act (1986/1052,
30/2001, 18/2004). Further growth in the public university sector in Finland is unlikely, as this growth hasceased for now and the universities need outside funding sources to ﬁll the gaps left by state subsidies.
Major reforms in the Finnish higher education system are, however, and still ahead. Like many
European countries, Finland has inflexible higher education structures leading to the problem ofgovernance systems that have remained relatively unchanged for decades. This has led to an increase inbureaucratic administration and has caused a permanent deﬁciency in ﬁnancing. The Council of State has
set goals for the Finnish higher education system to improve the quality of operations and impact, and tostrengthen internationalisation. The problem is that decision-making in the publicly owned universities
and polytechnics is slow. The main problems in the 2000s are not likely to be solved by traditional
means. Contributions to higher education ﬁnance are needed from all stakeholders including students
and employers to maintain the level teaching quality.
For instance, internationalisation presupposes strong investments in teaching given through a foreign
language. The answer within the European Higher Education Area to shortfalls in funding is to force anincrease in student contributions. This means the adoption of tuition fees which is a question of politicaldecision making in many European countries.
However, it is possible that within a few years, all Nordic the countries will change their legislation
about tuition fees or allowing voucher systems in higher education. Discussion is ongoing in all Nordic
countries about imposing of tuition fees on non-European students. The idea is to use this resource tocover internationalisation expenses.

102

References
Aarrevaara, Timo – Kivistö, Jussi: Implement theories and practise: How the programme for increasing
education in the information industry ﬁelds was carried out. In: Mikä meitä ohjaa. eds. Aarrevaara, T.
& Herranen, J. In Finnish.
AMKOTA. Ofﬁcial on-line statistical data on polytechnics by the Ministry of Education Finland.
Greenway, David – Haynes, Michelle (2004): Funding Higher Education. In: Johnes, G – Johnes, J. (eds.):
International Handbook on the Economics of Education. Edward Elgar Publishing.
Johnstone, D. Bruce (2006): Financing Higher Education – Cost-sharing in International Perspective.
Center for International Higher Education. Lynch School of Education, Boston College. Publication
Series of Higher Education.
KOTA. Ofﬁcial on-line statistical data on universities by the Ministry of Education Finland.
MEXT (2006): Statistical abstract – Education, culture, sports, science and technology. Ministry of
Education, Culture, Sports, Science and Technology, Japan 2006.
MinEdu 2006a. Universities 2005, Annual report. Ministry of Education Publications 2006:31.
MinEdu 2006b. Research in Finland 2006. Published by The Committee of Public Information.
MinEdu 2006c. Education and Science in Finland. Ministry of Education 2006.
Minedu 2007a: Towards Research excellence in Turku. Reports of the Ministry iof Education, Finland
2007:14.
Minedu 2007b: The University of Eastern Finland – The Future University Today. Reports of the
Ministry iof Education, Finland 2007:15
Minedu 2007c: New University in the ﬁeld of technology, business studies and art and design. Reports of
the Ministry iof Education, Finland 2007:16.
OECD 2006a: Education at a Glance. OECD Indicators 2006.
OECD 2006b: Thematic Review of Tertiary Education. Country Background report of Japan. Higher
Education Bureau. Ministry of Education, Culture, Sports, Science and Technology. March 2006.
OECD 2006c: Thematic Review of Tertiary Education. Finland Country Note by John Davies, Thomas
Weko, Lillemor Kim and Erik Thulstrup. September 2006.
de Wit, Hans (2005): International Mobility, European trend and perspectives. In: Kehm, B. M. -De Wit
H., eds. Internationalization in Higher Education: European Responses to the Global Perspective.
European Association for International Education, 2005.
Yamamoto, Kiyoshi ( 2004 ) : Corporatization of National Universities in Japan: Revolution for
Governance or Rhetoric for Downsizing. Financial Accountability and Management. Vol. 20.

103

8. A Study on Expansion and Equality in Chinese
Higher Education
Ding, Xiaohao(The Institute of Economic of Education, Peking University)

Ⅰ. Two speculations about expansion and the equality of access
Since the 20th century, there has been the increasing access to education all over the world. Does
the inﬂuence of students' socio-economic backgrounds upon equality of educational opportunity varyin the process of education expansion? How is it changing? To put the question another way, does the
expansion of education bring about greater equality in access to education? Two speculations have been
put forward in exploring the questions. In 1993 Raftery and Hout suggested “ Maximally Maintained
Inequality ” (MMI) (Raftery and Hout 1993), and in 2001 Lucas presented the theory of “ Effectively
Maintained Inequality ” (EMI) (Lucas 2001).
Raftery and Hout analyzed the link between equality of access and the expansion of Irish secondary
education. Secondary education in Ireland has been expanding steadily in the 20th century, with a strong
surge in the late 1960s. The results show that this expansion may also lead to a loosening of class barriers
to educational attainment with the implementation of a series of education finance policy designed
to improve equality of access, the effect of social-class origins on educational opportunity declined.
However, class barriers were not removed. On the basis of this analysis, Raftery and Hout proposed
the MMI hypothesis. The core contentions of MMI can be summarized into following main points.
First, expansion does not necessarily alter the effect of socioeconomic status on access to education.
Second, if enrolment rises faster than demand (where demand is the amount of schooling expected on
the basis of population level and social class background composition), then lower-class persons obtain
more schooling, even so, the social class effect remains the same. Third, if completion for a given
level of education becomes universal for upper-classes persons, then the effect of social backgroundon that transition declines over times. That is, demand for education at a given level must have reacheda saturation point – must be “ maximized ” – before the differences in access to education between
privileged and weaker groups in society can be reduced. Otherwise, it is possible that the effect will be
the reverse: differences will be exacerbated. Parents of a high socioeconomic status will always ﬁnd andmake use of every possible avenue to increase educational opportunities for their children.
The MMI hypothesis has been inﬂuential since its proposal. It highlights competition between social
classes. However, its suggestion that “ the competition will be nil for any level of education that isuniversal. ” has been called into question and criticized by Lucas and others. Lucas believes that MMI

105

cannot show the deeper relationship between socioeconomic status and access to education because it
sees education as undifferentiated, with no distinctions of type or quality. On this basis, Lucas proposes
the EMI speculation. He suggests that for levels of education that are universal, competition will occur
around the type of education attained. Thus, for some levels, MMI implies the maximum amount ofbackground-related inequality is virtually zero, whereas EMI implies that for those very same levels
inequality will not only be nonzero but also nontrivial, that is, the background-related inequality will beconsequential.
Educational opportunities can be analyzed on several levels. The approaches to the question are in
the following three ways. The ﬁrst approach is the availability of a given level of education. Equalityof access can be examined by surveying years of schooling of all young people within the appropriate
age bracket, or by analyzing the make-up of the student body admitted to the institutions of the relevant
level. This kind takes a simple numerical approach to the question of equality. The second approach isconsideration of differences of type and quality within education. For example, institutions of higher
education can be divided into general higher education and vocational higher education; or they can be
categorized in terms of quality by their human and ﬁnancial resources or by reputation. Once categorized
by whatever method, student intake can be surveyed to determine the level of equality of opportunity.
This brings an extra level of complexity, over and above the simple numerical approach. The third
approach involves the results obtained from education. This might include analysis of how the beneﬁts
of education (ability to ﬁnd work, occupation, income, etc.) are distributed among those who received it.
Of these three approaches, MMI focuses on the ﬁrst and EMI on the second. The two speculations
are complementary, each examining an area ignored by the other. The integration of both helps theinterpretation of changes brought about by China's expansion of its higher education programs.

Ⅱ. Empirical ﬁndings of equality in Chinese higher education
Since the 1990s, student numbers in higher education in China have been steadily growing. This
expansion has brought about a definite increase in educational opportunities. But how have theseopportunities been distributed among different social groups? Has the expansion weakened the impact ofsocioeconomic status on educational opportunities?
This question is approached from two angles. One is that without consideration of the quality ofhigher education, changes in access to any form of higher education are assessed. The other is that
educational access for students of different socioeconomic status is examined in terms of stratified
schools of different quality.
Changes in overall enrolment of students in higher education
This section is based on urban household surveys conducted by the national statistics bureau in 1991
and 2000. It analyzes the socioeconomic status of individuals under the age of 23 who have received106

or are currently receiving higher education (including junior college degrees or above) (“ students ”).
Distributions of higher education students by household income per capita are presented in Chart 1
and Chart 2. In Chart 2, household income per capita is sorted by ascending order. The cumulative
proportions of students are represented by the vertical axis. The Curve thus plotted would be a 45-degreestraight line if the student proportions were identical for all income groups. Meanwhile, imitating the
calculation of Gini Coefﬁcient, the “ Gini Coefﬁcient of Higher Educational Equality ” has been deﬁned.
The coefﬁcient may range from 0.0 to 1.0. When the coefﬁcient falls to 0.0, absolute equalization ofhigher education opportunity among various income groups is presumed to exist, and as the coefﬁcientincreases, the levels of that equality decrease. The results of the “ Gini Coefﬁcient of Higher Educational
Equality ” for 1991 and 2000 are 0.4746 and 0.1520 respectively. That is, a very signiﬁcant increase canbe seen from the perspective of equality of distribution of higher education student family economic
status.
Chart 1.

Proportion of students coming from different economic groups

20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00

1991
2000

1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20

Chart 2. Cumulative frequency of students from different economic groups
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00

1991
2000

1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20

As well as economic status, educational background of students' parents or guardians (actually “ headof household ”) was also analyzed. From Table 1, it can be found that the proportion of students whose
head of household had a relatively low education level rose signiﬁcantly between 1991 and 2000. Thisshows that equality of access to higher education also improves among different social groups.
These results indicate that in the 1990s there was a marked improvement in access to higher education
for those from relatively poorer and less well educated backgrounds. Access to higher education was

107signiﬁcantly more equal in 2000 than it was in 1991.
Table 1. education level of head of household
Percentage of students

Education of head of household

1991
44.8
15.0
14.8
25.4

Junior college or above
Technical secondary school
High school
Junior high school or below

2000
30.8
13.8
18.4
37.0

The reforms of higher education funding in the 1990s brought about great changes. Finding externalfunds, particularly tuition fees and incidental fees, became much more important in higher educationbudgets. In 1995, public funds accounted for 73.29 percent of higher education expenditures. By 2000,
the proportion was down to 55.23 percent. In the meanwhile, tuition and incidental fees rose from 11.89
percent to 21.09 percent. Tuition fees, just 6 percent of higher education budgets in 1990, reached 16
percent in 1995 and 31 percent in 2000.The proportion of tuition fee per student to per capita net incomeof rural residents rose from 28 percent in 1990 to 67 percent in 1995; in urban areas it rose from 12.62
percent to 25 percent. By 1999, it had been 160 percent of the average rural income and 61 percent of
the average urban income. The policy of private cost sharing played an important role in the expansionof higher education, but the rapid increase in tuition fees provides reason to worry that access to higher
education may actually have become less equal during this period.
However the empirical analysis above does not indicate that there is increased polarization in accessto higher education during this period of rising fees. Access actually becomes more equal. There areseveral reasons for this. Firstly, the expansion of higher education has brought increased access to allsocial groups, particularly to the middle and lower classes. In 1991 there were 2.04 million students
in regular HEIs. By 2000, this figure had been up to 5.56 million. The expansion in student intake
perhaps counteracted the pressure towards inequality caused by rising tuition fees. This move towards
equality supports the MMI hypothesis to some degree. Secondly, the personal income of graduates rose
continuously and significantly throughout the 1990s. Research has shown that between 1991 and 2000
the Mincerian rate of return to education rose from 3.78 percent to 13.1 percent (Chen Xiao-yu et al.
2003), which shows signiﬁcant growth. Compared with private internal rate of return (including private
cost and private beneﬁt), the Mincerian rate of return, only reﬂecting private beneﬁt, may have playeda more important role in determining willingness to pay high tuition fees. Thirdly, the surveys adopted
in this paper only cover urban residents. It is not certain that the ﬁndings would be replicated if it wereextended to rural residents. Fourthly, higher education system is a pyramid structure with various types
and qualities of education. However, limitations on the data mean that this part of the analysis does not108

distinguish between admission to different types and levels of higher education. To complete a morethorough analysis, the second part of this paper will use other data to check for variation in quality
beyond simple access to higher education.
Analysis by different tiers of higher education
There have already been several useful analyses of access to higher education by level of institution.
Most of the research has concluded that socioeconomic status plays a dominant role in access to higher
education. However, taking different samples, researchers do not agree on the changes in equality ofaccess, especially the disagreement on the changes within individual levels of HEIs (Zhong Yu-ping etal. 1999; Xie Wei-he et al. 2000; Ding Xiao-hao 2000). Based on the data of questionnaires from June
2004, administered to students at various schools in different regions of China, this paper makes ananalysis of the socioeconomic backgrounds of undergraduates.
Several different methods can be used to judge the “ quality ” of HEIs. This paper divides the 15
selected institutions into Tier 1 and Tier 2 by their reputation and attractiveness to potential students. Tier
1 institutions are those which are directly afﬁliated with the Ministry of Education or are part of the “985
Program ”. Other institutions are classed as Tier 2. To take into account the attractiveness of institutions
to students, all agricultural and geological colleges belong in Tier 2.
Changes in students' occupational backgrounds
Occupational background is an important factor reﬂecting family socioeconomic status. The father'soccupation is taken to represent a student's background.
(1) An analysis is made on the composition of undergraduate colony in accordance with occupational
information of the entire labor force. Therefore, based on the data from China's 5th National Population
Census in 2000 on occupations, we deﬁne the ratio of student occupational background is as following:
the proportion of corresponding occupational population to the entire society is divided by the numberof students from various occupational strata. If the ratio nears to 1, the proportion of students from this
occupational background is much the same as that of the population working in this occupation; if theratio is less than 1 or even much lower than 1, the proportion is lower for students than for the population
as a whole. Likewise, if the ratio is higher than 1, the proportion for students is higher. Table 2 shows theratio of student' occupational background.
(2) The table 2 shows that children of agricultural and urban laborers are less likely to enter higher
education than the average for all professions (ratio<1). They are also less likely to be admitted to Tier
1 institutions in comparison with Tier 2 institutions. The children of ofﬁce workers, professionals andmanagers are more likely to receive higher education (ratio>1). Particularly striking is that children ofhigh level managers are 10 and 6 times as likely as the general population to enter Tier 1 and Tier 2
institutions, respectively. The difference in access to higher education here is very clear.

109

Table 2. The ratio of student occupational background
Tier 1

Tier 2Tier 1/Tier 2

Rural labor
Urban labor

0.27
0.73

0.49
0.76

0.54
0.95

Ofﬁce work/lower management
Professional
Administrator

3.61
2.82
10.62

3.20
1.92
6.58

1.13
1.46
1.62

(3) The “ occupational index ”1 integrates all of the occupations for a particular group. The weightingof each profession in the occupational index reﬂects its social standing (the higher the social status, thehigher the index). Table 3 shows the occupational index for students over four years at the two grades of
institution.
Table 3. Occupational index for the fathers of students

Tier 1
Tier 2Tier 1/Tier 2Year of admission into institution
2000
2001
2002
2003
56.8
55.4
57.8
58.4
51.8
50.9
48.2
51.1
1.10
1.09
1.20
1.14

Table 3 shows that for any given year, the occupational index of fathers of students at Tier 1
institutions is higher than that of at Tier 2 institutions. Over the sample period, there is a tendency to beon the rise in the occupational index between Tier 1 and Tier 2.
(4) In terms of occupational distribution, it is often the two extremes of the occupational scale which
attract attention. One extreme includes the most disadvantaged workers in society, like agriculturallaborers; the other extreme is the most advantaged, such as managers of government or party
organizations, company owners and high level technical experts. Table 4 shows the changes over four
years in the relative proportions of students from agricultural laboring backgrounds. Table 5 shows
administrative/professional backgrounds.
Table 4 shows that the proportion of students from agricultural labor backgrounds at Tier 1 institutions
is consistently lower than that of Tier 2 institutions. The proportion of Tier 1 to Tier 2 appears to decline.
Table 5 shows that the proportion of students from administrative/professional backgrounds at Tier 1
institutions is consistently higher than at Tier 2 institutions. The proportion of Tier 1 to Tier 2 turns out
to be on the rise.
1

The occupational index is calculated by assigning values to each kind of occupation, then weighting each one
according to its prevalence in the general population. The resulting index does not have any particular meaning,
and is used to look for trends only.

110Table 4. Proportion of students from agricultural labor backgrounds
Year of admission into institution
Tier 1

2000
0.187

2001
0.175

2002
0.141

2003
0.177

Tier 2Tier 1/Tier 2

0.296
0.632

0.297
0.589

0.340
0.415

0.312
0.567

Table 5. Proportion of students from administrative/professional backgrounds
Year of admission into institution
2000

2001

2002

2003

Tier 1
Tier 2

0.324
0.258

0.306
0.221

0.364
0.202

0.359
0.227

Tier 1/Tier 2

1.256

1.385

1.802

1.581

Changes in educational level of parents
Education attained by parents is an important indicator of the socioeconomic status of a student's
home. Fathers' educational degree is used to represent family educational background. The “ educational
index ”2 integrates all of the levels of education for a particular group. The weighting of each level in the
educational index reﬂects its social standing (the higher the social status, the higher the index). Table 6
shows the educational index for fathers over four years at the two tiers of HEIs.
Table 6.

Educational index for students' fathers
Year of admission into institution
2000
2001
2002
2003

Tier 1
Tier 2Tier 1/Tier 2

47.8
46.8
1.02

47.9
45.3
1.06

50.6
43.1
1.18

52.3
45.8
1.14

Table 6 shows that for any given year, the occupational index of students' fathers at Tier 1 institutions
is higher than that of Tier 2 institutions. Over the sample period, there is a tendency to be on the rise in
the educational index between Tier 1 and Tier 2.
2

The educational index is calculated by assigning values to each level of education, then weighting each one
according to its prevalence in the general population. The resulting index does not have any particular meaning,
and is used to look for trends only.

111Factors affecting entrance to different types of institution
Based on the above analysis, logistic regression is used to assess the impact of social and economic
factors on entrance to Tier 1 institutions.
The dependent variable will be a dummy variable representing entrance to Tier 1 institutions (y1).
Independent variables include: (1) home ﬁnancial situation (Eco); (2) a dummy variable representing
whether the father's occupation is in an administrative job or a professional capacity (Ocu-1-2); (3)representing whether or not the father is an agricultural or urban laborer (Ocu-7-8); (4) whether or not
the student is from an urban background (Residency); (5) year of admission into the institution (Time).
The results of the regression are shown in Table 7.
Access to excellent higher education (admission into a Tier 1 institution) is signiﬁcantly correlatedwith the student's place of residence, household ﬁnancial situations and the father's occupation. Amongstudent colony, the chance of the student who lives in urban area entering a Tier 1 institution is 1.48
times as high as that of a rural student (see the Exp (B) value for Residency). Students whose fathers
are laborers have slim chance to be admitted to a Tier 1 institution (just 0.768 times the chance of otherstudents). Students whose fathers have administrative or professional jobs have an obviously higher
chance of entry. Household incomes have a clear positive correlation with the chances of entering a Tier
1 institution.
Table 7.
ResidencyEco
Ocu-1-2
Ocu-7-8
Constant

Coefﬁcient B
0.392
0.047
0.123
-0.265
833.549

Regression results
SE
0.049
0.005
0.060
0.054
42.072

Level of signiﬁcance
0.000
0.000
0.042
0.000
0.000

Exp(B)
1.480
1.048
1.130
0.768

The results from the analysis of access to various levels of higher education are as follows.
(1)

The opportunities for higher education among children of laborers are fewer than those of otherchildren. The chances of entering a Tier 1 institution for these children are much lower than thoseof entering a Tier 2 institution. The opportunities for children of ofﬁce workers, professionals andmanagers are obviously greater. Students whose parents are administrators have 10 and 6 times
access to Tier 1 and Tier 2 institutions as much as the general population, respectively.
(2)

The occupational index of students' fathers at Tier 1 institutions is obviously higher than that ofTier 2 institutions. The index value for Tier 1 institutions gradually rose, while the value for Tier 2
institutions fell from 2000 to 2002.
(3)

The proportion of students from agricultural laboring backgrounds is obviously lower at Tier 1

112

institutions than that of Tier 2. The proportion of such students at Tier 1 institutions gradually fell,
while the proportion at Tier 2 institutions increased by degree from 2000 to 2002.
(4)

The proportion of students from administrative or professional backgrounds is obviously higher

at Tier 1 institutions than that of Tier 2. The proportion of such students at Tier 1 institutions
gradually rose, while there was a tendency to have a degressive fall in the proportion at Tier 2
institutions from 2000 to 2002.
(5)

The educational index of students' fathers at Tier 1 institutions is signiﬁcantly higher than that ofTier 2 institutions. The index value of Tier 1 institutions gradually rose, while the value for Tier 2
institutions fell from 2000 to 2002.
(6)

The ﬁnancial situation, parental occupation, place of origin and other factors have a signiﬁcanteffect over whether a student gains admission to a Tier 1 institution.
The research described above provides evidence for the explanatory power of the MMI and EMI
hypotheses. On one level, the expansion of higher education did bring about a clear rise in equality ofopportunity, as far as the number of students is concerned. This result ﬁts the MMI hypothesis. However,when examined on another level, where different levels of higher education are recognized, a trend
towards equality in higher education certainly does not appear. On the contrary, there is a growing
tendency for the highest quality education to be reserved for those of high socioeconomic status. It isthe non-elite institutions which have played the key role in expanding access to higher education for
disadvantaged groups in society. This is better explained by the EMI approach.

Ⅲ.

Causation discussion

Admission to Chinese universities is determined by a single centralized test – the College Entrance
Examination or Gao Kao. The strict link between Gao Kao results and university/college admission is
maintained by the education departments within each province working together. Problems remain inthese systems: the fairness of allocation of places at centrally designated key institutions has been called
into doubt; the problem of fees may deter poorer families from higher education. However, in generalplaces are allocated and admission granted based ﬁrmly on Gao Kao results. So what causes the skew
towards socially advantaged groups in admissions to the best institutions?
Two of many possible answers are:(1)

There is huge demand for places at the best primary and secondary schools among urban

residents. Extra-budgetary fees charged by these schools – including excess tuition fees charged to
students who did not meet the examination requirements for admission – have become an importantpart of their income. Though there has been an effort in recent years to rebalance public spending
on primary and middle schools, the results have been less than ideal. The increases in government
budgets for lower-ranked schools have lagged far behind the extra funding – public and private –attracted by the best schools. The gaps between urban and rural schools or between well-supported

113

and poorer schools have grown discouragingly large, and it is possible that they will grow larger
still. Differences in the ability of schools to attract funding amplify disparities in teaching quality
and resources, particularly in computer science and English – and these are heavily weighted
subjects in the Gao Kao.
(2) Extracurricular classes now account for an important part of the investment made in education by
urban residents. My research into education spending has shown that over 70% of urban householdswith children in education spend money on extracurricular classes of some kind. 30%-40% of
the total amount spent on education is now spent on extracurricular classes. The amount spent on
extracurricular classes shows a clear correlation with household income. This suggests that thelocus of competition for places in higher education has moved from schools themselves to out ofschool classes. Economically advantaged groups improve their children's academic performance by
providing them with high quality extracurricular classes; by giving them artistic or sports training
outside school, they increase their chances of achieving “ special talent ” status (which gives themextra Gao Kao points). Both of these raise their chances of gaining admission to a top higher
education institution.

Ⅳ. Policy implication
One problem that has faced Chinese students for a considerable time is that banks are happy tomake student loans to those attending top-rated institutions, but are reluctant to make loans to students
at second tier colleges. The research shows that it is these second and lower tier colleges which are
attracting great numbers of children from socioeconomically and culturally disadvantaged families.
Improving the provision of loans to these students is therefore a key task in broadening opportunities forhigher education.
In discussions of opportunities for higher education, the focus has generally been on ﬁnancial policy:
tuition fees, student loans, etc. However, the cultural resources and social capital of households also
plays a role in this problem which cannot be ignored. Financial aid for higher education continues toexpand in China, meaning that the opportunities for economically disadvantaged families are evergreater. However the monopolization of many places at the best institutions by socioeconomicallyadvanced groups has not been resolved. If anything, the problem is becoming worse. I believe thatthe reason for this comes from systemic imbalances which are unconnected to the funding issue. It istherefore important to develop a range of social and educational policies at the same time as improving
the funding situation. These policies might include a rethink of admissions policy. Policy ideas andsystems for boosting admissions among the disadvantaged could be borrowed from other countries(such as the USA). Quotas for rural students could be suggested for the best institutions. Disadvantaged
students could be given not just ﬁnancial support, but also relaxed standards for university admission.

114

Increased access to any form of higher education is important. It does, at least, increase one form ofequality. The experience of some countries has shown that the expansion of higher education does notnecessarily bring about greater equality of opportunity. Therefore, expansion of higher educational
opportunities for Chinese urban residents in the 1990s should be seen as a hugely important step in thedevelopment of social justice.
However, looking only at the total number of students in higher education is not sufficient for ananalysis of the full situation. Different levels and kinds of higher education available are also extremely
important. Equality across the range of educational classes is an integral part of a nation's education
system. Raftery and Hout explained the omission of quality concerns in the MMI hypothesis. Secondary
education in Ireland follows a national curriculum, with all students nationwide studying the same
curriculum at any given time. As a result of this, they believed that variations in quality would not
matter.
This is, obviously not the case in China. There are great disparities within China's higher education
system, and differences in resources and reputation among schools are very signiﬁcant. Thus research
into equality of access to higher education should not only focus on the total number of students, butalso on the quality of higher education available. Variation in quality is an indicator of equality of accessto higher education in China. With rapid expansion of higher education, variation in quality, as the key
index is much more important than variation in quantitative. It's also a major factor contributing tostudents' choice of HEIs. Findings in this paper show that while inequality in the provision of higher
education was decreasing, inequality in the quality of that education remained constant, and even grew.
For this reason, any approach to the equality of Chinese higher education must include not only the total
number of students in education, but also a view of the quality of the education they receive. Only a
combination of these two aspects gives a comprehensive view of the situation.
In any society, family background will have a certain inﬂuence on one's access to education available.
This is an immutable rule. Children in disadvantaged social groups will be limited or at least affected bytheir home ﬁnancial situation, their parents' education level and other factors. Obstacles to entrance intohigher education exist at the primary and secondary levels. It is certain that to some extent, opportunities
for higher education are reduced for the economically disadvantaged classes of every country. Absoluteequality in educational opportunities in any nation – developed or developing – is a utopian dream.
However, the pursuit of increasing equality is a goal which policy makers should not dismiss lightly.
If equality of opportunity is cast aside, and household wealth is allowed to become the deciding factor
in access to higher education, the consequences would be serious and long lasting. In order to create
harmonious development, it is necessary to improve opportunities for the disadvantaged and narrow thegap between those with the greatest opportunities and those with the least. This requires careful analysisof the systems that create these differences and discussion of solutions to them (Yang Dong-ping 2005;
Li Wen-li 2005). Public policy should aim at controlling and reducing the differences among social

115

groups. Following the expansion of higher education, the state can promote equality of opportunity
through the allocation of resources and ongoing reform of state funding. With China's higher educationin its current state, it is clear that the structure of the education system and the funding system willinﬂuence not only whether or not a child enters higher education, but also the quality and type of higher
education he or she will receive.
References
Lucas, S. R. (2001). “ Effectively maintained inequality: education transitions, track mobility, and social
background effects ”, American Journal of Sociology 106 (6), 1642-1690.
Raftery, Adrian E. and Hout, Michael (1993). “ Maximally maintained inequality: expansion, reform, andopportunity in Irish education, 1921–75”, Sociology of Education 66, 41–62.
Chen Xiao-yu, Chen Liang-kun and Xia Chen (2003). “ An empirical analysis on rate of return ofeducation in 1990s China ”, Peking University Education Review (2), 65-72.
Ding Xiao-hao (2000). “ Survey of students from families in various financial situations ”, Research on
Education Tsinghua University (2), 102-108.
Li Wen-li (2005). “ Student loans in higher education: reality and policy ”, in Min Wei-fang (ed.)
Educational Reform: an Economic and Policy Perspective. Beijing: Educational Sciences
Publishing House, 313-333.
Xie Wei-he, Li Xue-lian (2000). “A survey of fairness in higher education”, in Tsang Mun (ed.) Economic
Analysis of Educational Policy. Beijing: People's Education Press, 257-274.
Yang Dong-ping (2005). “ The problem of fairness in higher education in China ”, Retrieved on Oct. 22,
2006, fromhttp://www.eastmoney.com/20050221083200149570.html
Zhong Yu-ping, Lu Gen-shu (1999) “ Factors affecting the decision to pay for higher education ”, Higher
Education Research，(2), 31-42

116

9. International Experience in Aﬀordability,
Accessibility and Student Assistance: Lessons for Japan
Alex Usher(Educational Policy Institute）
This paper is based on a presentation given to the conference Worldwide Perspectives on Financial
Assistance Policies and their Relevance to Future Policy Reform for Japanese Higher Education on
December 5, 2006. Its aim is to provide certain lessons for Japan in terms of developing policy in termsof higher education affordability and student loan policies.
Much of what is contained herein is based on two previous papers by the same author, entitled Global
Higher Education Rankings: Affordability and Accessibility in Comparative Perspective (Usher andCervenan, 2005) and Global Debt Patterns (Usher 2005), both published by the Educational Policy
Institute, both of which are available on the Institute's website. This paper in effect summarizes those
two documents and tries to draw out speciﬁc lessons which may be of use to Japanese policy makers.
In keeping with the origins and purposes of the document, it has been organized into two parts. Part I is
an examination of national-level data on affordability and accessibility in higher education; part II is an
examination of international experiences in the administration of student loans, with particular reference
to the question of income-contingency.

Part I: The Relationship Between Affordability and Access: National-Level Data
When it comes to national debates on policies related to access to higher education, a rather simplisticand deterministic interpretation of the laws of supply and demand is often heard. “ As the price of tuition
increases, ” goes the argument, “ so must demand for higher education fall. ” The corollary, of course, isthat cheap tuition will increase demand for higher education and that free tuition will therefore create thegreatest demand and therefore also the greatest levels of access to education and participation.
A similar strain of thought suggests that not only will free tuition create the greatest aggregate demand,but that the reduction of tuition fees will stimulate demand the most at the bottom end of the income
scale. Tuition fees, according to this argument, are inherently regressive because they place a higher
relative burden on individuals from lower-income backgrounds. According to this argument, thereduction of tuition fees will not only stimulate aggregate demand, but also stimulate demand inparticular among lower-income youth (McKenzie 2007). Thus, reduced or free tuition will not only117

increase access in the “ Type I ” sense of providing greater aggregate participation, but also in the“ Type II ” sense that Europeans often refer to as “ democratization ” ; that is, providing more equality inopportunities in higher education across different income strata (see Anisef 1985 for descriptions of TypeI and Type II access).
A moment's thought, of course, shows that there are two elementary logical flaws in this argument.
The ﬁrst major ﬂaw is that it ignores the possibility of price discrimination. Despite the fact that theargument acknowledges the fact that price does not act as a barrier to all people in equal measure, itdoes not then take the next step and suggest that the price be adjustable downwards for those for whom
it might in deter from attending higher education. This is in fact precisely what grants are meant to do.
By acting as a kind of “ negative tuition ”, they reduce the price of education. In those countries where
grants are targeted based on income, grants therefore act as a form of price discrimination to help lower“ net tuition ” for those who are perceived to require assistance in overcoming price barriers.1 This is amore efﬁcient use of resources than lowering tuition across the board, as those who are not in need ofassistance do not receive the windfall gains that would result from lower general levels of tuition.
The second major ﬂaw is the argument that it assumes that any increased demand that results from any
reductions on tuition or even net tuition will lead to greater access (in either a “ Type I ” or “ Type II ”
sense) necessarily requires educational institutions to meet such new demand as is generated by thedecrease in price. This, to put it mildly, is a generous assumption, particularly if institutions are not able
to raise revenue from tuition fees to meet demand. If institutions cannot do so, of course, then demand
will outstrip supply and – in the absence of a price mechanism - rationing sets it (Finnie 2004). In higher
education, this rationing usually takes the form of rationing by secondary school achievement. Of
course, this too leads to inequality, as across all OECD countries, prose and quantitative literacy scoreare signiﬁcantly higher among students from high-income families than among those from lower-income
backgrounds (Willms 2003).
Proof of these observations can be found simply by looking at international comparative data on higher
education affordability and accessibility in 15 countries (results for Belgium are split to show results forboth the French and Flemish communities). Table 1 shows the educational costs and total costs (i.e.
educational costs plus living expenses) of higher education in 15 countries, with data for the Flemishand French communities shows separately. Not surprisingly, countries with low or zero tuition (that is,
Belgium, Finland, France, Germany, Ireland, and Sweden) appear to be generally cheaper than thosecountries that have tuition fees.
1

Deﬁnition of net tuition. Note that McPherson etc, deﬁne it differently

118

Table 1: Education Costs, Living Costs and Total Costs (in Yen)Country

Education Costs

Living Costs

Total Costs

Australia
Austria

526,590
203,344924,416
800,710

1,451,006
1,004,054

Belgium (Flemish)
Belgium (French)
CanadaFinlandFrance112,969
112,969
570,80237,346239,122570,155
634,869
675,327
719,289
742,938

683,124
747,838
1,246,129
756,635
982,060

Germany

286,562

607,580

894,141

IrelandItaly

216,630
293,754681,840
608,190

898,470
901,943Japan
Netherlands

1,134,619
273,771846,818
677,308

1,981,437
951,079

1,038,103
747,061
1,183,285
872,670

1,495,711
864,325
1,631,297
2,193,845

New Zealand
457,609
Sweden117,264
United Kingdom
448,012
United States
1,321,174
Note: All ﬁgures in 2004 Yen, converted at PPP.

Of course, affordability is not simply about cost. Even if something is deemed “ cheap ”, consumers
must have the ability to pay for it. Figure 1 displays the relative total costs (that is the combined
educational and living costs) of each country, expressed as a percentage of national GDP per capita,
which is a rough proxy for family income across countries. Looking at the data in this way does changes
our view of theUnited States and New Zealand in particular. Despite having the highest combined

costs, the US is only the fourth most expensive jurisdiction when costs are expressed as a function of
Figure 1: Combined Living and Educational Costs as a Percentage of GDP/capita
60%
50%
40%
30%
20%
10%

119

Ja
p
Nz
a

UK

Au
s
US
A

Ca
n

Fr

Au
t

Ita

Fr
)
Fi
n
Ne
t
G
er
Sw
e

Be
l(

)
Fl
Be
l(

Ire

0%

ability to pay; New Zealand, on the other hand, goes from fourth most expensive to the most expensive
when ability to pay is taken into account.
Looking at costs is instructive, but it is by no means the best way to examine affordability in various
countries. After all, most countries spend hundreds of millions – if not billions – of dollars on various
forms of educational subsidies in the form of loans, grants and concessionary tax measures, all of which
are designed to offset to varying degrees the total costs of education. Table 2 shows each country's perstudent expenditures on various types of student assistance. Figure 2 shows each country's total perstudent assistance expenditures as a percentage of each country's total costs.
Figure 2 shows that different countries take very different approaches to student aid. In Sweden, where
tuition is already free, the state also makes every effort to help students cover any conceivable educationand living cost; on average, roughly 92% of total costs are covered by government loans and grants.
This is a very different approach than that taken by other countries with free tuition; in Ireland, Belgium
and France, student assistance covers less than 30% of total costs. The Netherlands and Finland are also
very generous with their student assistance problems, as is the United States. Of particular interest forJapanese readers is the fact that Japan is noticeably different from other countries which charge tuition
fees in that it provides its students with very little in the way of subsidies and loans to offset the costs ofTable 2: Grants, Loans and Tax Expenditures per student (in Yen)Country
Australia
Austria
Belgium (Flemish)
Belgium (French)

GrantsLoans

TaxExpenditures

189,242
116,844
37,821

1,261,764
887,211645,303

1,570
263,309112,736

Canada34,931
153,289

712,907
1,092,840

110,017170,321FinlandFranceGermany

352,879
185,694
43,379403,755
796,366
850,763085,064
269,911

Ireland
Italy
Japan

141,481
34,9410756,989
867,002
1,981,437

6,727
0
50,035

Netherlands
New Zealand

546,021
168,356

405,058
1,327,355

00SwedenUnited Kingdom
United States

379,263
132,440
553,737

485,062
1,498,857
1,640,1080087,928120

education.
Figure 2 – Total Average Aid as a Percentage of Total Average Costs in Sixteen Jurisdictions
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0%
Swe

Net USAFin

UK

Can Ger

Aus

Aut

Nza

Fr

Bel

Bel

Ire

Jap

Ita

( Fl) ( Fr)

When subsidies are subtracted from total costs, as is done below in ﬁgure 3, one gets a very different
picture of affordability across countries. The line between countries where tuition is free and thosewhere it is not is much thinner than previously; students in France and Canada, for instance, actually
have similar levels of costs after all subsidies - represented in the graph by the dark blue line whichshows costs “out-of-pocket after tax expenses” (OOPATE) - despite tuition being free on one country andover $3,500 (US) per year in the other. Figure 3 also provides graphic representation of Japan's position
as an outlier among these countries in that its OOPATE costs are substantially higher than those in othercountries – indeed, they are almost twice as high as they are in the United States.
Figure 3:

The Role of Grants, Loans and Tax Expenditures in Reducing Total Costs
USD 18,000
USD 16,000
USD 14,000
USD 12,000
USD 10,000
USD 8,000
USD 6,000
USD 4,000
USD 2,000

OOPATE

GrantsTax Expenditues

p
Ja

K

za
N

U

SA
U

Ita
Au
s

Ire

Fr
C
an

r)
Au
t

l)

er

(F

Be
l

G

et
N

(F

Be
l

e
Sw

Fi
n

USD 0

Loans

However, as noted earlier what is important is not simply costs, but costs as a function of a person's
ability to pay (for which GDP/capita is here used as a rough proxy). Table 4 shows a variety of different
possible measures of affordability, including Total Costs (that is, living and educational costs combined),

121

Table 3:
Total Costs

1,451,006
1,004,054
683,124

1,261,764
887,211645,3031,260,194
623,901
532,568

Out=of-Pocket
Costs After
Tax
Expenditures
876,478
623,901
532,568

Canada747,838
1,246,129

712,907
1,092,840

602,890922,519602,890
720,519

FinlandFranceGermany

756,635
982,060
894,141

403,755
796,366
850,763403,755
711,302580,852

314,783
711,302537,473

IrelandItaly

898,470
901,943756,989
867,002750,262
867,002750,262
867,002

Japan
Netherlands
New ZealandSwedenUnited Kingdom

1,981,437
951,079
1,495,711
864,325
1,631,297

1,981,437
405,058
1,327,355
485,062
1,498,857

1,931,402
405,058
1,327,355
485,062
1,498,857

1,688,177
315,321972,477
60,390912,697

United States

2,193,845

1,640,108

1,552,180

882,940

Country
Australia
Austria
Belgium (Flemish)
Belgium (French)

Net Costs

Net Costs
After Tax
Expenditures

Net Costs (Total Costs minus grants), Net Costs After Tax Expenditures and Out-of-Pocket Costs AfterTax Expenditures (Net Costs minus loans, grants and tax expenditures) as a percentage of GDP/capita.
Again, this data does not change the picture radically, but certain nuances emerge. The United States
and Japan tends to look relatively better on these comparisons than it does on those in table 3 because of
their high levels of GDP/capita, while New Zealand tends to look worse.
The preceding survey has shown both that there are multiple perspectives to “ affordability ”, and also
that, depending upon which deﬁnition of accessibility is chosen, different countries may be perceived as
being more or less affordable than others. However, by almost any measure, Sweden should probably
be judged as having the “ most affordable ” system of higher education, followed by Finland and theNetherlands, both of which, like Sweden, have modest costs combined with very extensive loans andgrants programs.
After these countries come Belgium and Ireland, two catholic European countries with no tuition, noloans programs and small need-based grants program, followed by Austria, Germany and France. Italy,
the most expensive continental European country and Canada, the least expensive Anglophone country,
are very similar in terms of their overall affordability proﬁles, despite one of them having theoretically122

“ free ” higher education and the other having tuition fees of over $3000 US. Australia and the UnitedStates have similarly close affordability proﬁles, despite the wide gap in the “ sticker ” price of tuition.
Table 4:
Total Costs

Net Costs

Net Costs
After Tax
Expenditures

Out-ofPocket Costs
After Tax
Expenditures

Australia
Austria
Belgium (Flemish)
Belgium (French)

36.2%
24.4%
17.5%
19.1%

31.5%
21.5%
16.5%
18.3%

31.4%
15.1%
13.6%
15.4%

21.9%
15.1%
13.6%
15.4%

Canada

29.7%

26.1%

22.0%

17.2%

FinlandFranceGermany
Ireland

20.2%
26.1%
23.5%
17.8%

10.8%
21.2%
22.4%
15.0%

10.8%
18.9%
15.3%
14.8%

8.4%
18.9%
14.2%
14.8%

Italy
Japan
Netherlands
New ZealandSweden

24.2%
51.2%
23.5%
51.3%
23.6%

23.3%
51.1%
10.0%
45.6%
13.2%

23.3%
49.9%
10.0%
45.6%
13.2%

23.3%
43.6%
7.8%
33.4%
1.6%

United Kingdom
United States

43.8%
42.7%

40.2%
31.9%

40.2%
30.2%

24.5%
17.2%

Country

Lagging behind the others are three special cases: the United Kingdom, New Zealand and Japan. In thecase of the ﬁrst two, the issues are the same: despite costs that are modest in international comparison,both countries have high costs of living, low GDP/capita and provide their assistance predominantly inthe form of loans. As a result, in neither country can education truly be considered as “ affordable ” andin most respects lag behind some allegedly expensive countries such as the United States.
Last, there is Japan – a country with high costs and little public student assistance. On the face ofit, Japan appears to be extremely expensive. This does not, however, mean that higher educationis truly beyond the means of most Japanese families. As is the case in many East Asian countries,
household savings rates in Japan are extremely high; hence, most students can likely draw upon parental
contributions far larger than those commonly seen in Europe and North America. Thus, while all thevarious methods of calculating cost and affordability make Japan seem extremely expensive, it is also
possible that Japanese students can draw on extensive family resources to meet these costs.

123Some consideration needs to be given to the difference between educational costs in the public andprivate education sectors. If we could look only at public 4-year colleges in the United States (which,after all, hold approximately two-thirds of all American enrolments at the 4-year level), the US'
affordability proﬁle would be close to that of Ireland. In Japan, excluding the private sector (would not
make much sense because it holds two-thirds of all students) would have the effect of giving Japan anaffordability proﬁle comparable to New Zealand's.
So much for affordability. The question, of course, is whether or not any of this matters in terms ofaccessibility – that is to say, does a country's performance on affordability bear any relation to the sizeor diversity of its student population?
In its previous work, the Educational Policy Institute has used four basic indicators of accessibility
for which data seems widely available on a comparable basis internationally. The ﬁrst two are related
to “ Type I accessibility ”, or the size of the country's higher education system, and the second two are
related to “ Type II accessibility ”, or the equitableness of social background of the students within thesystem.
1) Participation Rates. This is the most obvious of all possible indicators: the fraction of young people
engaged in higher education studies. There are, however, some difficulties in trying to find standard
cross-national measures of participation, in part because students in different countries do not all starthigher education at the same time. This study will use the participation rate of the four years of age withthe highest rates of participation.
2) Attainment Rates. Raw participation rates are unsatisfactory measures of accessibility for two
reasons. Firstly, it measures participation as opposed to completion. Secondly, it corrects for a possible
confound in participation rates between “ number of students attending ” and “ length of time in studies ”(i.e. a country with a lot of people in short programs may have the same participation rates as a country
with fewer people in longer programs). Using some kind of measure of attainment corrects both these
problems. This study will use the percentage of the 25 – 34 year old population has completed a “tertiary
type A (higher education) ” degree.
3) The Educational Equity Index (EEI). This measure is described in an Educational Policy Institutepaper entitled A New Measuring Stick (available at www.educationalpolicy.org/pdf/measuringstick.pdf).
In brief, it measures educational inequality by measuring the degree to which students from high socioeconomic status backgrounds (as measured by parental education levels) are over-represented in higher
education. The speciﬁc measure is best expressed algebraically:124

Jurisdictional EEI = 100 × (( % of all males 45-65 with HE degrees )% of all students whose fathers have HE degrees)High EEI scores imply that the composition of the student body “ looks like ” society as a whole; low EEIscores imply that the student body is drawn disproportionately from already privileged families.
4) Gender Parity Index. Proximity to gender parity is another possible indicator of equity in higher
education access. In this indicator, any deviation from gender parity (strictly speaking, from the 51-49
female-male split seen in most countries) is treated as being indicative of inequality and therefore
negative.
Data on all these points was available in thirteen countries (unfortunately, no data for the EEI wasavailable for New Zealand or Japan). The results are shown below in table 5.
Table 5: Comparative Measures of Accessibility

Country
Australia
Austria
Belgium
CanadaFinlandFranceGermany
Ireland
Italy
Netherlands
SwedenUnited Kingdom
United States

Participation
Rate (best 4
years)
22.0% (6th)19.4% (9th)19.4% (9th)20.3% (7th)39.7% (1st)Attainment
rate of 25-34
year-olds
25% (3rd)
7% (13th)
18% (10th)
26% (2nd)
21% (8th)

Educational
Equity Index

Gender Parity
Index

59 (5th)38 (12th)37 (13th)63 (2nd)
61 (4th)

1.24 (7th)1.19 (4th)1.18 (3rd)1.34 (10th)
1.23 (5th)25.2% (4th)17.5% (13th)
19.0% (12th)

19% (9th)
13% (11th)
23% (5th)

55 (8th)43 (11th)63 (2nd)1.27 (8th)0.92 (1st)1.29 (9th)32.4% ( 2nd)
29.6% (3rd)19.4% (9th)24.1% (5th)

12% (12th)
25% (3rd)
22% (7th)
23% (5th)47 (10th)67 (1st)55 (8th)
57 (6th)1.34 (10th)
1.08 (1st)1.54 (13th)
1.23 (5th)20.3% (7th)

31% (1st)

57 (6th)1.35 (12th)

Looking at participation in the “ best 4 years ”, Finland has by some considerable distance the highest
rate among the countries in this study with nearly 40 percent of its 21-24 year-olds participating inhigher education. Italy (32.4%), the Netherlands (29.6%), France (25.2%) and the UK (24.1%) are next,
meaning that the top five countries in terms of participation are all European. Beyond that, the next
seven countries' participation rates are all bunched in a narrow range between Australia's 22% andIreland's 19%. Last comes Germany, with the survey's lowest rate of higher education participation at125

just 17%
Attainment rates for the population aged 25-34 are presented in the second column of table 5. Despite
not having an extraordinarily high participation rate, the United States has the highest attainment rateof any country (31% of all 25-34 year-olds). Canada is second, followed closely by Australia and theNetherlands. Austria, by some distance, is the weakest performer on this measure and Germany does
not fare particularly well, either. Most countries attainment rates for this age group, however, cluster
in a fairly narrow band between 18 and 22% of the population. Perhaps the most striking result is
Italy's. Despite having the second-highest participation rate in the survey, it also has the second-lowest
attainment rate which is striking evidence of the serious student retention problems facing the Italianhigher education system.
We noted above that a high EEI score indicates that the student body is very similar in sociodemographic characteristics to the overall population, while a low EEI score indicates that the student
body is much more “ elite ” than the overall population. The portrait of accessibility shown by the thirdcolumn of table is an interesting one. Under this measure of accessibility, the Netherlands has the mostaccessible system of education, followed closely by Canada and Ireland. A number of countries cluster
closely behind these two: Finland, Australia, the UK, the United States, Sweden and France all havestudent bodies with very similar social compositions.

The real outliers in terms of accessibility are

Belgium, Austria and Germany, all of which have relatively small student bodies and low attainment
rates. It therefore seems likely that there is a very real connection between the size of the system and theequality of access.
The Gender Parity Index (GPI) shown in column four is the ratio of female-to-male value of a given
indicator, with GPI of 1 indicates parity between sexes; a GPI that varies between 0 and 1 means adisparity in favour of boys; a GPI greater than 1 indicating a disparity in favour of girls. Germany
and the Netherlands have the students bodies where the gender balance is closest to ﬁfty-ﬁfty.2 Most
countries – Austria, Belgium have gender balances in the range between 1.18 and 1.35, meaning thatfemales in all these countries make up between about 55 and 60 percent of the student body. Only in
Sweden does the gender balance tip any further to one side, with females forming almost exactly twothirds of student body being female.

2

In terms of scoring the gender parity index, one must not rank based on the highest or lowest GPI scores (which would imply
a preference for one gender or the other), but rather based on the distance from the parity score of one. In most cases, this does
little to change the rank score; only in Germany, the only country in the survey where males continue to outnumber females inhigher education, does it make a major difference.

126

Just as different yardsticks of affordability provide perspectives about which countries are “ affordable ”,
different yardsticks of accessibility provide different insights as to which countries are “ accessible ”.
That said, the Netherlands and Finland both do well in terms of having both high participation rates andgood or excellent gender parity scores
The United States, Ireland and the Commonwealth countries of Canada, Australia and the UK havestrikingly similar results in many areas. France, Sweden and Italy do slightly worse than the anglophonecountries on most measures, while Germany, Belgium and Austria are at the bottom of most measures ofaccessibility except for gender parity. None has a particularly participation or high attainment rate andall of them have student bodies that are much more “ elite ” in their social origin than is the case in othercountries.
Overall, the data suggest quite strongly that the links between accessibility and affordability are not as
straightforward as some policymakers and analysts believe. Sweden, for instance, which as we haveseen has virtually eliminated all ﬁnancial barriers to education, does not do especially well on any of
the key measures of accessibility. On the other hand, Canada and the United States, which fare poorly
on most affordability measures, do reasonably well in terms of accessibility. With the already-noted
exceptions of Finland and the Netherlands, no other country has consistently high or consistently scores
across both the affordability and accessibility rankings. The worst that can be said about any country
is that they are mediocre across both rankings – a description that would apply to Italy, Germany andAustria.
From a Japanese perspective, this is heartening news. Although Japan appears to be doing badly in termsof the affordability of higher education, this is not necessarily evidence that it must ipso facto be doing
poorly in terms of accessibility, too. Many countries that do well in terms of affordability don't do wellin terms of accessibility and vice-versa. The link between accessibility and affordability at the national
level is simply not very strong.
Why might this be? Well, to begin with, the demand for higher education is determined by many thingsother than simple price. Among the more obvious determinants are the structure of the economy and thereturns to education; the social value society (and more particularly parents) places upon education; andthe steam of qualiﬁed graduates emanating from secondary school.
As noted in the introduction, though, not all of the demand for higher education can necessarily be met.
Having high demand for post-secondary education is no guarantee of equality of opportunity; if demandcannot be met then rationing needs to be imposed either through fees or, if this is prohibited, secondary127

school achievement. And both of these, as we have seen, are equally likely to disproportionately affectyouth from lower-income backgrounds.
As a result of all this, the effect of “ affordability ” on accessibility, at the national level at least is reallyquite small. Does this mean that affordability doesn't matter? Well, no. Policies related to affordability
can still affect who attends PSE at the margins if they are well-designed and well-targeted. Moreover,affordability policy can also have many positive policy outcomes in areas unconnected to access. A
more affordable education likely means that students have better living and study conditions. They
may be less likely to take on part-time work, or if they do, they may not need to work as many hours.
More affordable education may result in lower student debt, and it may also result in students becoming
independent of their parents much quicker (this is not likely a policy goal that would be embraced in
Asia, but in Scandinavia the independence rationale is frequently given as a reason for the generosity of
their student aid programs).
In other words, promoting generally affordable higher education (in the sense of lower average costs)
may have a number of socially desirable outcomes – but increased accessibility is probably not one ofthem. For that, more targeted measures of student aid are probably required; in this case, student grants
and student loans, the latter of which is the subject of the next section of the paper.

Part II: Designing Student Loan Repayment Systems
Japan, as we have seen in Part I of this paper, is notable internationally for its reliance on student loans
as a means of supporting students. There is also considerable concern about the repayment burdenthat loans may be causing graduates in an economy which for the last decade has been decidedly
unwelcoming to young workers in the country. As a result, some interest has been expressed in thepossibility of developing an income-contingent loan system. Part II of this paper examines some of
the lessons that can be brought to bear on this question from international experience in student loan
repayment systems.
The key point to grasp at the outset of this discussion that neither “ income-contingent ” nor “ mortgagestyle ” loans have any inherent effect on access to higher education. As any student of human capitaltheory will attest, the decision to pursue a course of studies is based on the cost of attendance, plus thecost of foregone income minus any subsidies that might be provided. Only to the extent that loans are
subsidized can they affect the decision to attend; and, as we shall see, the decision to subsidize a loan isindependent of whether or not the loan is “ income contingent ”.
The most frequently-used policy to subsidize student loans is the subsidy of student loan interest. Most

128

student loan systems subsidize interest to some degree (Japanese Type II loans and the American Stafford
Unsubsidized loans are rare exceptions). In Germany, no interest is charged at all on the student loan,
meaning that in real terms the loans carry negative interest. Australia and the United Kingdom provide
loans with interest rates equal to the rate of inﬂation. The Netherlands provides loans at a cost equal tothat of the government rate of borrowing (which is technically not a subsidy, but nevertheless provides
students with access to credit at below-market interest rates). In Canada and the United States, loans
are charged at two different rates depending on whether or not one is still enrolled in school. While inschool, students pay zero nominal interest rates (i.e. negative real rates); in repayment, students pay rates
which are either equal to or not far off commercial rates.
Governments can also subsidize loans by forgiving substantial portions of loans for a variety of reasonsat the start of the loan repayment period. In Canada and Germany, students with high levels of debt
at graduation often are given loan remission payments to bring their debts down to a certain level
which is considered the maximum permissible debt (e.g. 10,000 euros in Germany). In Germany and
the Netherlands, some debt forgiveness is triggered by timely completion of study (some Canadianprovinces also have timely completion conditions on their forgiveness programs). Germany also hassome debt forgiveness based on academic merit (the top third of each graduating class receives somedebt forgiveness).
A number of subsidies can also take place during the repayment period. In Canada and the UnitedStates, favourable tax treatment is given to interest paid on student loan debt. In Canada, New Zealandand the United States, certain portions of loan interest may be written off during periods of low income;in Canada, some of the principal may also be forgiven if loan payments are deemed to be persistently too
high for the individual to make payment over a 3-5 year period. In the United States, many states havedebt forgiveness programs contingent on post-graduate work in particular ﬁelds which are deemed inneed of skilled labour (e.g. teaching or providing medical service in remote areas).
All of these subsidies should have some kind of effect (albeit probably fairly marginal) on access tohigher education because of their effect in lowering the net cost of attendance. And all, it should be
noted, can be delivered regardless of whether or not a loan is of the “ income-contingent ” or “ mortgagestyle ” variety.
Income-contingency, as it is typically defined, involves two elements: a threshold beneath which no
payment is required and a percentage of income (usually but not always marginal income above thethreshold) which makes up the required payment. This description holds true for the versions of incomecontingency in use in Australia, New Zealand, the UK and – prior to its abolition in 2003 – Sweden.

129However, most student loan programs share at least one feature with these systems, and that is theexistence of a threshold beneath which no payment is required. In Canada, the United States, theNetherlands, Germany and Sweden's new (post-2003) system of repayment, there exist thresholds
beneath which no payment is required. Because of this, these systems might be thought of as “semi ”-income-contingent, though they have been described variously as “ soft ”income-contingent systems(Usher 2005) and as “income-contingent deferral ” systems (Ziderman and Albrecht 1991). Thus, thedividing line between “income-contingent ” and “mortgage-style ” systems is not quite as sharp as issometimes thought since both systems employ the concept of a threshold.
In fact, if one could imagine two loan repayment systems, side-by-side, with identical income thresholds
beneath which no repayment is required and identical subsidy terms, it would be possible to compare
the pros and cons of the two systems. At levels of income beneath the threshold, students are treatedexactly the same in each system. At levels of income just above the threshold, however, “ hard ” incomecontingent systems (that is, those where payment above the threshold is calculated as a percentage ofincome) will be gentler than the “ soft ” income contingent systems (that is, those where payment above
the threshold is calculated based on a ﬁxed amortization schedule). However, as income increases, theburden of the “ hard ” income-contingent loan repayment will become heavier while those of the “ soft ”
income-contingent remain constant. At some point the “ hard ” system becomes more onerous, though
exactly where this happens will depend on the size of the outstanding debt, prevailing interest rates andthe percentage of marginal income the “ hard ” system requires borrowers to pay each year.
Thus, from the student point of view, excluding any considerations of the subsidization of the loan, thebeneﬁts of “ hard ” income-contingent ” loans are in part a function of how much income one has. Fromthe government point of view, however, the beneﬁts of an income-contingent system lie almost entirely
in how sagaciously it can place the threshold level for non-payment.
The critical nature of the threshold point is not well described in the literature but deserves to be better
understood. To the extent that loan interest is subsidized (as is the case in most income-contingent
systems, notably Australia and the UK), the placing of the threshold has a major impact on the costs ofthe scheme to government. When the Australian government decided in 2004 to raise the threshold to$35,000 from $26,000, it prompted the Australian Tax Ofﬁce to perform an immediate write-down 8%(A$800 million) of the total value of outstanding HECS debt. Losses of a similar size were incurredin the UK when the threshold was raised from £10,000 to £15,000. In the new Thai system of student
loans, where the repayment threshold has been set substantially above the level of the average wage, it
is expected that the scheme will lose well over half (and possibly as much as eighty percent) the funds it
gives out in Net Present Value terms.

130This argues for setting the threshold as low as possible – except that a low threshold negates the major
purported benefit of income-contingency, which is that such systems are generous to students during
the period right after graduation when their incomes are low and/or unsteady. The challenge forgovernments then is to ﬁnd a level for the threshold which is high enough to provide real beneﬁts toborrowers without being overly burdensome on the public treasury.
(It should be noted here in passing that the foregoing discussion only matters for those governments whowish to provide subsidies to students through discounted student loan interest. If no interest subsidies
are planned, then the placing of the threshold limit is a much less weighty matter since it has far smaller
effects on government expenditures)
Table 6: Average Debt-to-Income Ratios and Debt Service Ratios
Average
Debt at
Graduation

Estimated
Avg.
AnnualIncome of
Recent
University
Graduates

DebttoIncome
Ratio

Estimated
Avg.
Monthly
Payments

Estimated
Avg.
Monthly
Income of
Recent
University
Graduates

Estimated
Avg. Debt
Service
Ratio

Australia
CanadaGermany*$14,697$18,900€5,600

A$38,000
C$38,000€41,136

38.7%
50%
13.6%

$126.67$209.83***€105.00

A$3,166
C$3,166€3,428

4%
6.6%
3.1%

Netherlands
New
ZealandSweden€8,700$15,930€28,000
NZ$44,51031%
36%€60.29
NZ$236.15€2,333
NZ$3,709

2.6%
6.4%

230 000 SEK

290 400 SEK

79%914.36 SEK

24200 SEK

3.8%

£8800

£22,000

40%

£90

£1833

2.9%

$19,300

US$34,100

57%

US$108.00 –US$189.68***

US$2842

3.8 – 6.7%**

UnitedKingdom†
UnitedStates**At 2004 PPP, $1Cdn = US$.78 = A$1.08 = €.75 = NZ$1.17 = SEK 7.46 = £.48

* Under a strict 20-year amortization scale, German students' repayment rates would be about €37/month, or just over one
percent of monthly income; however, there is a minimum payment of €105/month.
** The lowest ﬁgure is for “ graduated ” repayment over 25 years; the highest ﬁgure is for “ standard ” repayment over ten years.
Burdens of other repayment options, including income-contingent loans, fall between these two ﬁgures.
*** Canadian and American borrowers also beneﬁt from tax credits which would lower their repayment amounts somewhat. In
Canada, a student paying $209.83 per month would receive tax credits that would lower his/her payments by approximately$18/month, which would make “ net ” payments approximately $191.83/month. In the United States, the size of the tax
deduction tax deductions would depend on the interest paid (which is a function of the length of amortization period) and thestudent's tax bracket; assuming a 10-year repayment period and a 15% tax rate, the reduction would be on the order of $14/
month.

Finally, to the question of outcomes and student loan burdens in different countries. This necessarily
requires that a number of things be taken into account including the size of initial loan burdens, interest
rates, repayment periods, and the kinds of salaries students can expect once they graduate. Table 6,131below, shows a number of factors related to student loan outcomes and provides some ﬁgures for debtto-income ratios and debt-service burdens.
The real effect of different countries' debt repayment management schemes is probably best exploredby comparing the difference between debt-income ratios (column three) and debt burden ratios (columnsix). The rank order of countries in debt burden is very different in these two columns; New Zealand, forinstance, which has a relatively low debt-to-income ratio, has a very high debt burden ratio. Conversely,
Sweden, which has a very high debt-to-income ratio, has a very low debt burden ratio.
There are two principal reasons for the divergence of outcomes between the debt- burden measure andthe debt servicing measure. The ﬁrst, and probably most important, is the rate of interest charged on
student loans. It is no coincidence that the three countries with the highest debt-service ratios are also
the three countries with the highest interest rates – indeed, the only three countries that use revenue fromstudent loan interest to cross-subsidize other aspects of the loan system.
The second important factor here is the length of the repayment period. Most countries allow students
a relatively long period to repay their loans – 15 years or more. In the case of Canada and some of theAmerican programs, the short period of time to repayment is another factor pushing up the monthly
repayment burden. Even here, however, a distinction needs to be made. In the US, the individual can
reduce monthly payments by extending the loan period; Canadian borrowers do not have this privilege
and this makes an enormous difference to their monthly debt-servicing charges. For instance, if
Canadian borrowers could extend their payments to 15 years, their monthly payments would drop by
25%, thus bringing debt repayment burdens down under 5 percent of income.3
Table 6 is useful in dealing with averages, but it is important to remember that most students are not at
the average. Table 7 therefore extends the analysis somewhat to look at different national systems wheredebt and income are either higher or lower than average. For the purposes of this exercise, we havestipulated that “ high ” and “ low ” graduate income refer to situations where income is 133% and 66%,
respectively, of the average graduate income portrayed in Table 7, while “ high ” and “ low ” debt refers to
debt that is 150% and 50%, respectively, of the average debt reported in Table 7.

3

The total amount of interest paid over the life of the loan would, however, rise. Objections on this score could of course beeliminated by providing an extended repayment period as an option rather than a mandatory feature of the repayment program– those borrowers that preferred lower total interest payments costs to lower monthly interest payments could remain on the existing 9.5 year plan. Currently, extensions of the repayment period to 15 years are only available to those borrowers who havebeen receiving interest relief for considerable periods of time – i.e. only to the very poorest.

132

Table 7 – Estimated Debt-Service Ratios for Various Debt and Income Scenarios
High
Income,Low Debt

High
IncomeHigh
Debt

Average
Debt,
Average
IncomeLow
Income,
Low
Debt

Low
Income,High
Debt

Australia
CanadaGermany

6%
2.6%
2.3%

6%
8.0%
2.3%

4%
6.6%
3.1%

0%
5.2%
4.6%

0%
0%
4.6%

Netherlands
New ZealandSweden

1.0%
7.3%
1.8%

2.9%
7.3%
5%*

2.6%
6.4%
3.8%

2.0%
4.5%
3.6%

5.9%
4.5%
5%*

United Kingdom
United States**

4.4%
1.3-2.5%

4.4%
4.2-7.6%

2.9%
3.8 - 6.7%

0%
2.8-5.0%0%
8.6-15.3%

N.B. Low debt = 50% of average debt and high debt = 150% of average debt; low income – 66% of average income
and high income = 133% of average income* Under the standard formula, repayment for “ high debts ” would be 5.4% of income at “ high income ” and 10.8% ofincome at “ low income ” ; however Swedish student aid caps repayments at 5% of income.
** Low ﬁgure is for “ graduated ” repayment, high ﬁgure is for “ standard ” repayment. Burdens of other repayment
options, including income-contingent loans, fall between these two ﬁgures.

The picture that emerges from Table 7 is a complicated one, but a simple message emerges nevertheless.
No single loan program can be considered “ attractive ” to students regardless of their income and debt
levels. Programs that work for one set of borrowers usually do not work well for another. This is
another way of saying that the advantages and disadvantages of different student loan debt management
systems varies considerably according to one's income and outstanding debt.
Apart from this simple message, four subsidiary lessons can be learned from this table:
First, given the conditions on debt and income set here, the UK, Australia and Canada, the three
countries with the most generous loan income thresholds, are probably the best places to be if one is aborrower with low income and high debt. Care should be taken in interpreting this, however; should theCanadian student's income rise even slightly from the level shown here, he or she would lose eligibility
for interest relief and would be required to pay the full amount of the loan. In this case, the debt service
ratio would suddenly become the worst of the bunch, at just over 16% of pre-tax income. Australia,
however, because of its generous income thresholds and low initial rates of repayment, does not sufferfrom this problem.
Second, high earners have lower debt-service ratios under conventional mortgage-style systems thanthey do under “ hard ” income-contingent loan systems. This may be somewhat misleading, however, assome high earners undoubtedly pay more than the required minimum in these programs so as to avoid
interest charges. Conversely, of course, this implies that “ hard ” ICR systems can be much harsher onhigh-income borrowers than “ soft ” ICR systems.

133

Third, low earners generally have lower debt-service ratios in “ hard ” income-contingent systems thanthey do in mortgage-style systems. However, as the example of Canada shows, all it would take tochange this is a more generous system of income-contingent deferrals. In the Netherlands, New Zealand,
the United States and Germany, the cut-off for assistance is approximately 50%, 36%, 31% and 28% of
average graduates' salaries, respectively, which are too low to help the “ low-income student ” used in thisexample.
Fourth, in the “ worst-case ” scenario of having low income and high debt, the United States is clearly theworst place to be – in no other country do repayments of students in this position exceed 6% of income,whereas in the US the proportion can be as high as 15.3%.
What lessons, then, can Japan learn from student loan programs in other countries? Perhaps the central
lesson is that the decision to make a program “ income-contingent ” in the classic Australian sense isindependent of the decision whether or not to subsidize the loan system in some fashion and if so,
how these subsidies will be arranged. The Australian HECS system – which in many ways is a very
attractive system for students – is a very expensive program for government to run not because incomecontingency is inherently expensive but because the Australian government has chosen to attach avery generous and sophisticated set of subsidies to its program. A HECS-style system without similar
subsidies would end up looking very different and might not be as attractive to students.
To the extent that the problems with the current Japanese loan system appear to be the result of weaklabour markets reducing graduates' ability to pay, then some form of income-contingency or postgraduation subsidy would seem to be the right policy response. But this need not be a full-blown
Australian-style system; a Canadian-style system where graduates with high-debt-to-income ratios are
permitted to suspend payments for a period of time while government covers the cost of interest on theloan might also be an adequate response. It is at this point that the policy process must take into accountconsiderations of administrative efﬁciency and implementation costs in order to make a correct decision.
What works for one country rarely works as well if transplanted directly into another system.

134

About the Authors(Listed in alphabetical order)

Claire Callender
Email: callencs@lsbu.ac.uk
Claire Callender (BSc, PhD) is Professor of Social Policy at London South Bank University. She
is an expert on the UK's student finances in higher education and has written widely on this topic.
She has undertaken research for the most significant UK inquires into student funding including the1997 National Committee of Inquiry into Higher Education, chaired by Sir Ron Dearing; the 1999
Independent Committee of Inquiry into Student Finances in Scotland, chaired by Andrew Cubie; and the2000 National Assembly for Wales Investigation Group on Student Hardship and Funding, chaired byProfessor Teresa Rees. She recently completed studies for the Scottish Executive's Review of Fundingfor Learners, and for the Welsh Assembly Government's Graham Review of ﬁnancial support for parttime students. Her research also informed the 2004 Higher Education Act. She has been called upon to
give evidence to the House of Commons Education and Skills Select Committee.
Claire is part of London South Bank University's ESRC Research Group on the Family and Social
Capital and heads up the Employment and Education team. She is currently conducting research on
higher education and social capital and student bursaries. She has just been selected as a Fulbright New
Century Scholar for 2007-08.

Xiaohao Ding
Email: xiaohao.ding@263.net
Xiaohao Ding has been Professor of Graduate School of Education at the Peking University since
2000. Her research interests are in the ﬁelds of economics of education, and labour economics. She has
published extensively in the domains of economics and ﬁnancing of education.
Currently, her research focuses on the economics of education and training, and relationship between
education and labour market. She has also been doing research on risk of educational investment bymeans of laboratory experiments and migration training in China by means of action research.
She has been a consultant on several World Bank projects and DIFD projects, and also has strong
international experience.
Xiaohao Ding is deputy director of Institute of Economics of Education, which is a national Key

135

Research Base (one of the 100 key humanities and social science research bases approved by the
Ministry of Education of China.)

D. Bruce Johnstone
Email: dbj@buffalo.edu
D. Bruce Johnstone is Distinguished Service Professor of Higher and Comparative Education Emeritus
at the State University of New York at Buffalo. His principal scholarship is in international comparative
higher education higher education ﬁnance, governance, and policy formation. He directs the International
Comparative Higher Education Finance and Accessibility Project, a multi-year examination into theworldwide shift of higher education costs from governments and taxpayers to parents and students.
During a 25-year administrative career prior to his assuming his professorship at Buffalo, Dr. Johnstone
held posts of vice president for administration at the University of Pennsylvania, president of the State
University College of Buffalo, and chancellor of the State University of New York system, the latterfrom 1988 through 1994.
Johnstone has written or edited some 100 books, monographs, articles, book chapters, and book reviews.
He is best known for his works on the ﬁnancial condition of higher education, the concept of learning
productivity, student financial assistance policy, system governance, and international comparative
higher education finance. His newest book, published in 2006 by Sense Publishers, is Financing
Higher Education: Cost-Sharing in International Perspective. Other books include New Patterns forCollege Lending: Income Contingent Loans (1972); Sharing the Costs of Higher Education: Student
Financial Assistance in the United Kingdom, the Federal Republic of Germany, France, Sweden andthe United States (1986); In Defense of American Higher Education (co-edited with Philip Altbach andPatti Gumport, 2001); and Financing Higher Education: Problems and Solutions (2004: translated into
Chinese by Professor Shen Hong).

Masayuki Kobayashi
Email: masadayo@he.u-tokyo.ac.jp
Masayuki Kobayashi is Associate Professor of Center for Research and Development of Higher
Education at The University of Tokyo. He is an expert on student ﬁnancial assistance and has written
many reports and papers in this issue. One of his recent works is Equality in the Japanese Higher
Education System originally written in Japanese in 2005 and translated in Chinese in 2006.
He is a member of a research project on Grand Design of Japanese Higher Education led by Prof.
Motohisa Kaneko. One of the most significant researches on this project is High School Student andParents Survey. A Part of the ﬁndings from this survey is reported in this international conference.

136

He is a leader of “ The Task Force of International Comparative Studies on Student Financial Aid
Policies ” under the Ministry of Education, Culture, Sports, Science, and Technology, Japan. He is also
Visiting Professor of National Institute of Academic Degrees and University Evaluation and Visiting
Research Fellow of Japan Association of Student Service.

Craig McInnis
Email: c.mcinnis@unimelb.edu.au
Professor Craig McInnis is Principal Associate with the Australian education consultancy firm
PhillipsKPA. He is currently Visiting Professor at the Research Institute for Higher Education at
Hiroshima University. He is also a Professorial Fellow at the University of Melbourne, where he
was Director of the Centre for the Study of Higher Education from 1998 to 2004. In 2005 Craig was
nominated as an ʻexpert of international standing' by the Australian Research Council (ARC), College ofExperts.
Craig has conducted more than 30 national and international policy projects, strategic initiatives andconsultancies for governments and universities over the last ten years. He has published more than 60
papers, reports, evaluations and investigations on a wide range of higher education matters.
Craig's most recent projects concerned organisational change to promote e-learning, study abroad andstudent exchange systems, and the internationalisation of the New Zealand tertiary education system. He
is currently working on a study of the professional development needs for academics and administrators
involved in international education. He has also been commissioned to write on the student experience inhigher education for the forthcoming international encyclopedia of education.

Masayuki Shibata
Email: shibata@zam.go.jp
Masayuki Shibata is an Executive Director of Centre for National University Finance and Management.
He joined the Centre in 2006, having worked for two years as an executive director for planning andpublic relations in Japan Student Services Organization. Prior to joining JASSO, he was a director in the
Ministry of Education, Sports, Culture, Science and Technology. He has extensive experience in policymaking in the fields of student exchange, space exploration and life-long learning. He has recently
contributed a report on reforms of tuition and grant system in England to a research journal of CNFM.
He was educated at Keio University, and completed a MA in Economics at Northwestern University andan Ed.M at Harvard Graduate School of Education. He is also a founding member of a NPO, Culture
Creation for Students. He is a member of The Task Force of International Comparative Studies on
Student Financial Aid Policies under the MEXT.

137

Alex Usher
Email: ausher@educationalpolicy.org
Alex Usher is the Vice-President (Research) and Director (Canada) of the Educational Policy Institute(EPI), a non-partisan research organization dedicated to improving access to, and quality in, higher
education. A graduate of McGill University and Carleton University, with an academic background inhistory, economics and political science, Alex is the author of two dozen articles and monographs on
higher education and is a globally-recognized expert on student assistance and quality measurementin higher education. His main current activity is acting as manager of the MESA(Measuring theEffectiveness of Student Assistance) project, a 4-year longitudinal effort to establish the efficacy ofproviding grants to low-income students in their early years of study.
Throughout his career, Mr. Usher's involvements have focused on the context and policy environmentof post-secondary education and ﬁnances. He was the ﬁrst national director of the Canadian Allianceof Student Associations(1995-6), served as a researcher and lobbyist for the Association of Universities
and Colleges of Canada (1996-98) worked as a consultant for the Council of Ministers of Education,
Canada and the Government of Canada(1998-9), and was instrumental in the complex intergovernmental
negotiations at the birth of the Canada Millennium Scholarship Foundation (1999-2000). Immediately
prior to joining EPI, Mr. Usher was the Director of Research and Program Development (2000-3) for the
Canada Millennium Scholarship Foundation, where he was in charge of Canada's largest-ever research
project on access to post-secondary education.

138

6-December, 2006

International Symposium
Participant List

SURNAME, ﬁrst name
CALLENDER, Claire

London South Bank University,UK.

DING, Xiaohao

Peking University

JOHNSTONE, Bruce D.

Former Chancellor, SUNY

MCINNIS, Craig

Melbourne University and Hiroshima University

SHEN, Hong

Huanzhong University of Science and Technology

USHER, Alex

Educational Policy Institute

AAAREVAARA, Timo Johannes

Tampere University and Center for National Univ F&M

MURATA, Naoki

Higher Education Bureau, MEXT

HASEGAWA, Hiroyasu

Vice President, JASSOFURUTA, Motoo

Vice President, UT

KAKUTA, Yoshihiko

National University Support Division, MEXTMURATA, Yoshinori

Student Supprot Division, MEXTOSAKI, Hitoshi

Vice President, National Institute for Humanities

CHIGIRA, KenjiStudent Affaires, UT

HAMANAKA, Yoshitaka

National Institute for Academic Degrees and Univ Evaluation

ISHII, Eriko

Center for R&D of Higher Education, UTIWATA, Kozo

Musashino University

KAMBARA, Nobuyuki

Niigata University

KANEKO, Motohisa

Dean, Graduate School of Education, UT

KOBAYASHI, Masayuki

Center for R&D of Higher Education, UTKUWABARA, Yasushi

Policy Planning, JASSOMARUYAMA, Fumihiro

National Center for Univ Finance and Management

MARUYAMA, Masami

Student Life Support, UTMASUKO, Noriyoshi

General Planning, JASSONAKAMURA, Hiroyuki

General Affaires, JASSONISHIMORI, Toshikazu
NISHIMURA, FumikoCenter for R&D of Higher Education, UT
Kyoritsu Womenʼs University

NEGORO, Kyoko

Student Support, MEXTOKAMOTO, Kazuo

Director, Center for R&D of Higher Education, UTSHIBA, Masahiko

Policy Planning, JASSOSHIBATA, Masayuki

Center for National Univ Finance and Management

SHIMA, Kazunori

Center for National Univ Finance and ManagementSUZUKI, MichikoInternational Student Service, JASSOXU, Guo Xing

East China Normal University

YANO, Masakazu

Graduate School of Education, UTYONEZAWA, Akiyoshi

National Institute for Academic Degrees and Univ Evaluation

YOSHIDA, Kana

Yamaguchi University

YOSHIKAWA, Yumiko

National Institute for Academic Degrees and Univ Evaluation

YUAN, Fujie

National Institute of Multimedia Education

139

CAO, Yan

Student, Graduate School of Education, UT

DOU, Xinghao

Student, Graduate School of Education, UT

FUJIMORI, Hiroaki

International Univ of Health and Welfare

HARA, Maiko

Student Affaires, UTHIGETA, Takeshi

Student, Graduate School of Education, UT

HOZAWA, Yasuo

Japan Society for the Promotion of Science

HUAN, Wenzhe

Student, Graduate School of Education, UTISHIKAWA, Makiko

Student Affaires, UT

ITO Motoe

Student, Graduate School of Humanities, Sophia University

JING, Aihua

Student, Graduate School of Education, UT

KATAYAMA, Eiji

Center for R&D of Higher Education, UT

KOBAYASHI, Mariko

Policy Planning, JASSOKUBOJIMA, Yukie

Student Affaires, UT

LIU, Wenjun

Graduate School of Education, UT

MAEHATA, Yoshiyuki

Policy Planning, JASSOMOROZUMI Akiko

Center for R&D of Higher Education, UTOTAWA, Naoki

Center for R&D of Higher Education, UTSANO, Hideyuki

Student, Graduate School of Humanities, Sophia University

SASAKI, Jyunji

Student Affaires, UT

SATO, Nobuko

Center for R&D of Higher Education, UTSEKINE, Hiroshi

Student Affairs, UT

SHI, Peijun

Student, Graduate School of Education, UTSHIRAKAWA, Yuji

Waseda University

TAKEUCHI, Nahoko

Graduate Student, Sophia University

UEYAMA, Masahiro

Policy Planning, JASSO

WANG, Shuai

Student, Graduate School of Education, UT

WANG, Jie

Ochanomizu University

YAMAGISHI, Naoji

Student, Graduate School of Education, UTYAMAZAKI, Keiko

YANG, Zhouji

Center for R&D of Higher Education, UTStudent, Graduate School of Human Sciences, Sophia
University
Student, Graduate School of Education, UTYOSHINO, Masami

Student Affaires Division, UT

ZHAU, Jiashi

Student, Graduate School of Education, UTYANASE, Akiyasu

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