Japanese Higher Educational Financial Policy Addressing Universities’ Revenue Losses and Student Poverty: Agenda for Educational Equity

• In Event: Economic and Finance aspects of Education

Proposal

Abstract
This study examines how Japanese subsidy policies have impacted the revenue of higher education institutions, provided benefits to students in the form of scholarships and loans, and contributed to educational equity and equality in the higher educational market, following the coronavirus disease 2019 pandemic. It analyzes the government fiscal policies, extent of student poverty, and projected surplus revenue for both students and universities using educational fiscal and dropout data from 2019 to 2021. It employs Toutkoushian and Paulsen’s (2016) demand and supply model on quantity and price to model the Japanese higher education market in accordance with government’s financial policy. The findings highlight persisting challenges of student poverty and pandemics impact on national and private universities.

Keywords: economics of education, subsidy, finance, educational policy, student poverty

Perspective
This study extends the existing literature, focusing on HE market analysis and the role of subsidies for students and universities. It utilizes educational market theory to address the limitations of MEXT's educational subsidy program and the challenges associated with alleviating student poverty in HE.

Theoretical Approach and Methodology
Multiple Regression Analysis
We conducted a comprehensive analysis, comparing the changes in educational policies regarding tuition, fees, scholarships, and exemptions at both national and private university levels; evaluated the effect of these policy changes on institutions’ revenue and students’benefits by comparing them with the data recorded in previous fiscal year, assessed the solvency and poverty reduction measures for students. with respect to their educational progress and development-associated policies implemented by MEXT.
Higher Educational Market Analysis on Fiscal Policy
Considering demand-supply dilemma, we explored whether government scholarships and subsidies alone cannot achieve a satisfactory surplus of student and university revenue. Market theory guides our understanding of the relationship between student demand and university supply. However, Japan's educational market is ineffective in increasing student satisfaction and university revenue due to limited capacity and revenue sources. Hence, our analysis focused on how education economy loss and associated fiscal policies are interconnected with revenue support.

Addressing Fiscal Issues to Prevent Poverty in Educational Equity and Equality
We examined students’current fiscal situation, with aim of preventing student poverty, which also involves educational equity and equality issues. We examined students in poverty trap and below poverty line, their income, and that of their parents. The research period was based on the 2020 Government NATIONAL SURVEY/STUDENT DROPOUT SURVEY (2019–2021) conducted by MEXT.

Significance and Contribution
Hypothesis Testing
To investigate COVID-19's effects on student poverty in Japan's HE system, we focused on market factors that affected students’decisions to suspend their university studies.
We employed a regression model to test our null hypothesis:
H1: Subsidies, tuition exemptions, and per capita gross domestic product (GDP) did not initially influence students’decisions to suspend their university education.
The regression model's reliability was tested. By analyzing effects of government financial and budgetary policy changes, we developed regression equation to capture the dynamics of an incomplete market during 2018–2021, characterized by the economic uncertainty caused by COVID-19:
According to the fifth and sixth steps of stepwise regression analysis, the government's university budget and subsidies significantly affected number of students who suspended their education due to COVID-19. Students’financial situation did not deter them from suspending their studies. Therefore, the alternative hypothesis was supported: Subsidies, tuition exemptions, and per capita GDP initially influenced students’ decisions to suspend their university education.

Higher Educational Market Analysis with Fiscal Policy
Demand and Supply Curve Portraying Price and Quantity in Japanese National University Market
To model Japanese HE market in line with government financial policy, we employed Toutkoushian and Paulsen's (2016) demand and supply model that considers quantity and price. The demand and supply curves intersected at the equilibrium point in educational market, introduction of COVID-19-related stimulus measures. In FY2020, the Japanese government exempted 252.792 billion yen from admission and tuition fees for students pursuing HE (MEXT, 2020a); additionally, scholarships provided to students pursuing HE amounted to 235.384 billion yen (MEXT, 2020a).
Demand-side Dilemma for Higher Education Institutions and Students
Students were adversely affected by COVID-19-related economic uncertainties, which were precipitated by revenue losses and a dearth of earning activities. Scholarships encouraged student enrollment in national universities. Although this was beneficial, it was restricted by the total capacity control system. We term this a “policy dilemma”in Japanese national university market.

Student Poverty
Scholarships in Japan are provided without future payment obligations, but they are limited to households with an income below 3 million yen and no residual tax obligations. However, considering the future fiscal situations of households and student debts arising from scholarships with future payment obligations is crucial. Despite receiving scholarships, household incomes remain below the regression line at 3 million yen, leading students to experience “student poverty” and accumulate debt after graduation.
This situation is further exacerbated by the JASSO scholarship system in Japan, particularly because of the COVID-19 restrictions that increased student dropouts and suspensions. This is a major issue of the Japanese HE scholarship system, precipitating student poverty within the HE market. Student poverty can be categorized into the following two main types:
Students who receive scholarships that do not require repayment experience poverty, as their household income is below the poverty line.
Students who receive scholarships that require future repayment face poverty after graduating from university.

Conclusion for Preventing Poverty in Educational Equity and Equality
In response to COVID-19, MEXT implemented a vertical educational equity policy, introducing a new scholarship program and a tuition exemption system.
However, intergenerational inequity persists, as high-income households continue enjoying advantages in terms of income, HE, and better employment opportunities. This indicates that households with higher income and assets significantly influence favorable outcomes for their children. Thus, intergenerational inequity is another challenge faced by Japanese HE due to the COVID-19 pandemic.
Furthermore, the practice of ability-based classes, wherein students are placed in classes based on their academic abilities, contributes to widening educational disparities. Analyzing equity’s circumstances and their relationship to education raises important questions regarding the distribution of educational opportunities and fiscal attitudes of students from different household income backgrounds.

Author

• Masaru Fujikawa, Okayama University