With university graduates increasingly burdened by student loan debt, companies and local governments are increasingly offering repayment assistance to attract new employees. 

Construction companies are utilizing the inducement because of the difficulty in hiring workers due to the belief that the work is dirty and dangerous.

In April 2021, the Japan Student Services Organization (JASSO) began a program allowing companies to directly repay part or all of a student loan on behalf of an employee who took out the loan while in a university.

Heiwa Construction Co. of Oita city joined the program from this spring.

“We want to reduce the economic and psychological burden on our employees to provide an environment in which they can work with peace of mind," said an official in charge. "We hope job seekers will express an interest in us.”

While 65 companies signed up when the program first started, the number had expanded to 972 as of the end of July and was expected to top 1,000 this summer.

The number of individuals covered has also more than doubled from 813 in fiscal 2021 to 2,057 as of July.

An official with Hiroshima-based Miyata Construction Co. said the company joined the program as an enticement for college students after graduation.

The company will cover as much as half of the monthly repayment up to 2 million yen ($13,800). The program only covers employees right out of university.

The company has about 70 employees and has been seeking to hire about five new employees annually, but the company official admitted there have been years when only one or two new hires joined.

After including the program among the company benefits listed in the pamphlet sent out to recruitment offices at universities and other educational institutions, the company has received compliments from those advising students on finding a job.

The start of the program by JASSO helped those companies that had already been providing support to new hires in debt-repayment benefits. 

Those companies previously added the repayment portion to the monthly salaries of their employees. But that meant the employees had a larger amount of taxable income because the addition was considered as salary.

When companies send the payments directly to JASSO, the funds are not considered salary going to the employee so there is no increase in their tax burden. Social welfare premiums the employee has deducted are also lower because the repayment is not considered part of the employee’s remuneration.

JASSO benefits by receiving repayments on time and the companies can also write off the repayments as deductible expenses.

LOCAL GOVERNMENTS CLIMBING ABOARD

Some local governments are also shouldering repayment of student loans to secure teachers as well as young people who tend to leave for the excitement of the big city.

The Gifu prefectural board of education began a program to repay up to 1.44 million yen for college graduates who are hired as teachers at public elementary and junior high schools.

There are several conditions for those interested in the program. The individual must have graduated from a Gifu senior high school and passed the teaching licensing exam for the first time. The individual must also work for seven years to receive up to about 17,000 yen a month in repayments.

Teaching is another profession that has become more difficult to attract new employees because of the long working hours. 

But after the program was announced, Gifu Prefecture had 541 individuals take the exam to teach in elementary schools, an increase over the 520 of the previous year, the first such rise in nine years.

About 200 individuals expressed an interest in joining the program, but because the prefectural government will only cover 40 new teachers, the selections will be based on their exam results.

According to a study by the Cabinet Secretariat in June 2022, 36 prefectural governments and 615 municipal governments provided some support for repayment of JASSO student loans or similar loan programs by local governments.

But most local governments have conditions such as having the recipient reside or work within their jurisdictions for a certain period.

For example, Iwate Prefecture in northern Japan will repay half of a student loan up to a maximum of 2.5 million yen for those who move to the prefecture and work at least eight years for a company certified by the prefectural government.

The Yamagata prefectural government will provide up to 600,000 yen in support to repay student loans for individuals who have worked outside the prefecture but relocate to Yamagata and work there for at least five years.

(This article was written by Hajime Ueno, Chika Yamamoto and Yukihito Takahama.)