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The Japan Scholarship Foundation provides loans to gifted students and those who would otherwise be unable to continue their studies for economic reasons. In the 51 years between its establishment in 1943 and the end of fiscal 1993, it provided a total of about 2,560.4 billion yen in scholarship loans to approximately 4.89 million students.

The foundation's student aid programs are divided into interest-free loans and interest-bearing loans. To minimize the repayment burden on recipients, interest-bearing scholarship loans are long term and low interest. National treasury funds are used to bridge the gap between the interest charged and interest paid on funds loaned by the foundation.

In fiscal 1994 the number of loans available to graduate students was increased by 3,500, including 1,500 for doctorate candidates and 2,000 for master's degree candidates. In addition, a new interest-bearing loan system was introduced for master's degree candidates. This quantitative enhancement of student aid programs was prompted largely by the rapid growth in the number of graduate students in recent years. The number of loans available for undergraduate students and junior college students was also increased by 3,900. As a result of these measures, the foundation disbursed a total of 211,051 million yen in loans in fiscal 1994, an increase of about 11,900 million yen over the total for fiscal 1993. Recipients totaled 463,321 (T ables II.4.4, II.4.5).

A June 1993 report of the Consultative Committee on the Japan Scholarship Foundation System titled "On the Future Form of the Student Aid System" urged further improvement of loans for graduate students. This was based partly on the May 1991 report of the University Council, which pointed out the need for improved conditions for graduate students, and partly on changes in the circumstances of student life. In the light of these reports, the Ministry of Education, Science and Culture is studying future improvements to the Japan Scholarship Foundation system.