TOKYO: An increasing number of companies are paying off the student loans of their employees. Thanks to a loan payment system introduced in fiscal 2021, both the workers and their employers are able to reduce their tax burden.
The companies’ move also aims to help secure talented individuals by alleviating the anxiety of young employees struggling with rising prices and higher interest rates.
“It felt like a burden thinking about how I would be paying back my loan for more than 10 years,” said Yuta Hashimura, 29.
He joined Silver Life Co., a Tokyo meal delivery service company for the elderly, in 2019.
Hashimura, who borrowed ¥2.8 million in interest-bearing student loans during his college years, had to pay back about ¥20,000 every month.
In his third year at the company, Silver Life launched a program to fully cover employees’ student loan payments.
The programme is available to all employees, whether they joined the firm immediately after graduating or in the middle of their career. The company pays off the remaining balance over a period of seven years.
“It was a huge relief because I didn’t have to worry about paying the loans back,” Hashimura said. He now invests ¥20,000 in the Nippon Individual Savings Account investment programme every month.
The company has shouldered about ¥40 million in total of student loans for about 40 employees.
“We want our employees to feel secure and work with us for the long term,” said Arisa Izumi, 30, manager of the general affairs and human resources department at the company.
Average of ¥3.36 mil per student
The Japan Student Services Organization (JASSO), which administers the national programme to financially help students, offers three types of financial aid: grants with no repayment obligation, interest-free loans and interest-bearing loans.
In fiscal 2024, there were 3.58 million students at universities, junior colleges, graduate schools and other education institutions. Roughly one third, or 1.15 million, utilised financial aid, and 620,000 students within that amount took out interest-bearing loans.
Students can borrow ¥20,000 to ¥120,000 in interest-bearing loans per month, with an average total loan amount of ¥3.36 million per student. Paying back the loans typically takes 17 years on average.
A first-year student who is 18 years old and attends Meiji University recently moved to Tokyo from the Kansai region and said he is going to apply for financial aid. “I was surprised that rent is higher than I expected in Tokyo. The cost of food and my student commuter pass is also expensive,” he said.
There are concerns regarding rising student loan rates following the Bank of Japan’s review of its monetary policy.
A fixed-rate loan in which the rate remains unchanged during the payment period jumped to 2.42% in March of this year from 0.07% in March 2020.
This means taking out loans of ¥3.36 million, the average amount, would require paying back ¥4.23 million based on the rate in March. The same amount would be ¥3.38 million based on the rate in March 2020.
A first-year female student who is 18 years old and goes to Sophia University, said, “I’m worried about paying back my loans after I start working.”
Aiming to secure talented staff
Students who have taken out student loans have their eyes on firms that offer payment support programmes.
In fiscal 2021, JASSO established a system in which companies pay all or part of their employees’ student loans.
Before the system was created, companies and others who paid off the loans would add relevant financial support to employees’ salaries. However, that increased employees’ income taxes.
By utilising JASSO’s payment system, the entities can write off the amount to reduce the burden of corporation tax, which would also cut back on tax burden for employees.
Major security service provider Alsok Co. introduced the payment system in 2024, paying up to ¥1.08 million per person over five years for employees who have worked at the company for five years or less.
“We want to create a working environment friendly to employees and secure talented personnel,” said Maya Osaki, 51, executive officer and chief of personnel administration at Alsok.
The number of local governments offering similar financial support is also increasing.
The Yamagata prefectural government pays up to ¥1.248 million to individuals who live and work in the prefecture for at least five years after graduating from universities or other institutions.
The local government splits the cost with the prefecture and all 35 municipalities in the prefecture.
According to a survey by the Cabinet Secretariat, such programmes have been introduced in all 47 prefectures and 876 municipalities as of June 2025.
According to JASSO, the number of payment system cases involving companies or local governments was 320 in fiscal 2021 but jumped to 4,852 in fiscal 2025. About 26,000 company employees and other types of employees have received the support.
In a survey by job information agency Mynavi Corp. conducted on people who graduated this year, 22% of respondents said that the availability of a student loan payment programme affected their choice of employers, indicating the program was a key factor in students’ job search activities.
A woman said in the survey that she only applied to companies with the support programme. - The Yomiuri Shimbun
