Student loan

Student loans are loans that are intended to finance the cost of living and / or possible tuition fees .

In Germany, the BAföG has the task of bearing the cost of living - provided that the student's parents have little income within the meaning of the law and some other conditions are met. Student loan providers were therefore only available to finance expensive private university courses.

Since the beginning of 2005 - with the ruling of the Federal Constitutional Court that made tuition fees possible in Germany - there has been increasing discussion about supplementary (to finance tuition fees) or alternative loan models as well as income-related student financing . In order to be part of this business from the start, some banks soon presented plans for student loans. Long after the DKB, which implemented Germany's first student loan offer together with Gesine Schwan and CareerConcept, the world's first provider of education funds, in autumn 2004, Deutsche Bank was finally launched in October 2005 as the first larger, nationwide bank . In the meantime there are several other offers from private credit institutions, some of which have since withdrawn. The clear market leader is the KfW student loan from KfW , which is now also brokered by Deutsche Bank and Commerzbank (which in the meantime had their own offers).

KfW student loan

The Kreditanstalt für Wiederaufbau (KfW) was founded after the Second World War in December 1948 with the aim of financing the reconstruction of the German economy. Since April 2006, the KfW development bank has been offering a student loan, which should enable all students to undertake their first degree.

Shortly after the ruling by the Federal Constitutional Court on the prohibition of tuition fees in the University Framework Act (which was overturned), the KfW banking group presented its idea for a student loan for the first time. In particular, KfW CEO Reich wants to open up a new market for KfW - that of education financing, which is only really worthwhile with tuition fees.

The student loan from KfW

The student loan serves to finance the cost of living and, according to KfW, aims to increase the overall number of university graduates on the one hand and to enable high school graduates from poor families in particular to study on the other. The latter is actually the job of BAföG , 50% of which is a grant, the rest is an interest-free loan - on the other hand, the student loan is very expensive (100% loan, interest-bearing).

The KfW student loan does not require a credit check or collateral, but is not granted in the event of personal bankruptcy. It is available to all German students, non -EU nationals and those who have completed their education at all state-recognized universities, provided that the applicants have not yet reached the age of 44.

The loan itself is fully paid by KfW. KfW has commissioned local sales partners to provide advice and to accept applications. Since April 3, 2006, applications can be submitted to these sales partners (see web links).

The interest rate is currently (as of August 2014) at 3.32% nominal or 3.33 (effective). It has reached its previous low, starting with 5.1%, the high in between (10 / 2008–03 / 2009) was nominally 6.5%.

Funding amount - funding period - repayment

Between € 100 and approx. € 650 can be paid out monthly. “Approximately” means that the interest will be deducted during the payment phase, so that the requested amount minus the interest will be transferred. A deferral of interest can be requested from the 6th semester onwards.
The disbursement phase lasts a maximum of 14 semesters (students over 34 years of age a maximum of 10 semesters, students over 39 years of age and advanced training or doctoral students a maximum of 6 semesters), whereby the amounts can be redefined every semester.
After the end of the course, there is a waiting period (repayment-free phase) of 6–23 months. From the first receipt of repayment, the repayment period is 25 years, whereby the amounts are variable (each for the duration of one semester). The minimum amount is € 20 per month.

advantages

Every student can apply for the KfW student loan at the same interest rate, regardless of the subject and place of study, grades, their own income or the income of their parents.

EU citizens between 18 and 44 years of age who are completing a full degree course, further education or a doctorate (regardless of the field of study) receive the student loan without a credit check or proof of means.

You can repay the loan in full at any time (special repayments and full redemptions are possible on April 1st and October 1st of each year) without incurring additional costs.

The interest rate is variable and is set anew every six months. When the contract is signed, KfW Bank also guarantees the student an upper interest rate limit for a period of 15 years.

The loan can be combined with other financing offers such as BaföG or educational loans .

The reference period ends at your own request after the end of the first degree or after the 14th semester at the latest.

disadvantage

The student must provide proof of achievement to secure further payment of the loan. After the 5th or 6th semester, certain evidence must be provided that proves the progress of the course.
Reasons for an end to the payments can be more than 2 semesters of vacation or a lack of proof of achievement.

First evaluations of the KfW student loan

The federal government answered two small questions from the left-wing parliamentary group and the Greens (Bundestag printed matter 16/3978 and 16/3979). Among other things, the following results emerge from this:

A credit check is not completely dispensed with, as "hard negative features" such as personal bankruptcy lead to the refusal of the loan.
The credit is predominantly (60%) used by people who are in the first four semesters .
If the maximum loan amount of € 650 is used over 14 semesters, the debtor must repay over € 351 per month for 25 years.
The average loan amount is currently € 490 per month. This leads to a monthly contribution of € 265 if you use 14 semesters and 25 years of repayment.

Deutsche Bank "dbStudentenKredit"

Any student at a German university or college, regardless of the subject, could apply for the Deutsche Bank's “dbStudentenKredit”. As a prerequisite for granting a “dbStudentenKredit”, the bank required a detailed, written, study plan. This had to show which course work was done when and what the future course of studies should look like. In addition, before granting a loan, the bank obtained information about the student's creditworthiness from the Schufa . Since the end of 2013 this offer has not been given to new interested parties.

Funding amount - funding period - repayment

In the 1st and 2nd semester you can usually only get a maximum of 200 € per month for living expenses and tuition fees, in higher semesters, however, up to 800 € per month.
The payout period is linked to the amount of the payout: It is a minimum of one and a half and a maximum of five years.
The interest rate is variable in the payment phase. It can rise or fall at any time.
With the end of your studies, the payments also end. After that, the repayment rates and interest will be regulated in a new contract. In the first year after the end of your studies (career entry phase), no repayments have to be made. Those who find a job earlier can pay off the first installment three months after starting their career.
You have a total of 12 years to repay the loan with interest to Deutsche Bank. There is also the option of paying off the debts all at once (special repayment right at any time).

advantages

The parents' income is irrelevant when the loan is granted.
To ensure that students do not go into debt for the rest of their lives, the bank has stipulated that loans and interest may not exceed the limit of € 30,000 until the end of their studies.
The "dbStudentenKredit" is not suitable for those who are planning to study abroad, because the financing will only continue during a semester abroad if you are also enrolled in Germany at the same time.

disadvantage

Foreign students from non-EU countries can only take advantage of a loan if they have a German place of residence and an unlimited residence permit at least two years before the start of their studies.
Anyone who exhausts the maximum credit line and pays back over 12 years, including interest, must expect more than € 45,000 in debt.
An additional risk is that the actual loan amount cannot be calculated due to the variable interest rate in the disbursement phase. In addition, the repayment is only regulated by a new contract after completion of the degree.

Risks of the offer

Borrowing always carries the risk of the debt trap, so-called over - indebtedness . Since studying does not necessarily lead to a job, the loans may not be repayable. Debt counseling centers provide information on how to deal with an increasingly worsening situation, e.g. For example, the personal bankruptcy missing or avoids borrowing from the outset. Since with many offers, unlike BAföG, repayment is due one or two years after the end of your studies, a student loan should not be taken out without prior advice.

In addition, there is a sometimes serious difference between the conventional BAföG and, for example, the KfW loan with regard to the possible amount of debt: While the debts incurred through BAföG amount to a maximum of € 10,000 regardless of the amount and duration of the funding, this value can in individual cases at (KfW ) Student loans can be up to ten times higher - with a similar amount of funding. However, if average study periods and moderate funding levels are taken into account, it can be assumed that, as a rule, the factor 3–5 will not be exceeded too often. As a rule, in Germany, unlike in the USA, student loans are only used as a supplement to an individual financing mix.

Compare student loans

The student loan providers differ in terms of their background (government, private sector), the type of funding (tuition fees, cost of living, one-off payments, graduation loans), additional services or the maximum funding amount. The cost of a student loan is influenced by the following parameters:

Interest rate: the effective interest rate should always be compared here, because only this includes all additional costs. If the interest rate is variable, this means that it can also change over the term of the loan (usually upwards).
Income-dependent repayment: since income-dependent repayment does not incur any interest or repayment installments in the classic sense, you cannot compare these directly with the credit conditions of other institutions. In the case of an income-related repayment, a percentage is shown, but this is not interest, but actually a percentage that must be repaid per month from the gross salary.
Additional fees: It can happen that the interest rate also includes additional fees that you don't have to pay for other offers (such as life insurance).
Waiting period: After the last payment, borrowers are granted a kind of rest period, the so-called waiting period. This can be up to two years. It enables graduates to start their careers adequately.
Repayment period: The repayment period can have a significant impact on the total cost of the student loan. The longer the money is loaned to you, the more interest costs you will incur.

Student loan for tuition fees in Hessen

The loan granted by the LTH - Bank for Infrastructure was used exclusively to finance the tuition fee, usually € 500 per semester ; The LTH - Bank for Infrastructure is an organizationally and economically independent, legally dependent institution in the Landesbank Hessen-Thüringen .

On behalf of the State of Hesse, the LTH - Bank for Infrastructure has offered to finance the tuition fees for attending Hessian universities since the 2007/2008 winter semester.

The law passed in the Hessian state parliament on June 17, 2008 to ensure equal opportunities at Hessian universities has repealed the obligation to pay fees for attending Hessian universities; however, it does not provide for the abolition of the repayment obligation for student loans granted. The existing contracts will therefore be continued in accordance with the statutory provisions applicable when the loan was concluded. This means that the loans granted must be repaid by the students in due course as intended in the respective individual case. The tuition fee according to the Hessian Tuition Fee Act was levied for the first time for the 2007/2008 winter semester and for the last time for the 2008 summer semester.

Graduation loan

The oldest form of student loan is the graduation loan and was first introduced by Wirtschaftshilfe der Deutschen Studentenschaft e. V. after its establishment on February 19, 1921 and from June 2, 1922 by the loan office of the German Student Union e. V., which both were transferred to the loan office of the German Student Union in 1929. V. were incorporated. Graduation loans serve the students in the graduation phase to cope with the cost of living and / or possible tuition fees, the offers are regional and partially limited to individual universities.

For the exam period, the offers of the loan offices are cheaper than bank offers, as they waive processing fees and demand lower and fixed interest, if available.

Study Fund

Student funds are a similar and alternative offer to student loans. Providers are not banks, but companies such as B. Brain Capital or the LL.M. Education funds that raise money from private investors. Flexible in terms of duration and amount, students are funded after a selection process during their studies. Unlike a student loan, however, the repayment is made as a percentage of the income and only begins when you start your career. Depending on the provider, studies and career entry can be supported with a content-related funding program.

Student Loans in the US

In the US, student loans are primarily granted by education funds, but also by banks. Approximately 40 to 50 percent of US students take out such loans. Their share of student finance has also increased significantly in recent years due to the sharp rise in tuition fees. In 2012, college graduates had student loan debts totaling $ 1.1 trillion, averaging $ 27,000 per capita, and typically had to pay off over 10 years. Experts speak of an education bubble because salaries do not keep pace with training costs and the quality of training has not improved despite rising tuition fees.

Alternative to student loans: Academic tax

As an alternative to student loans, an academic tax of up to 5 percent on post-graduate income was discussed in England in 2010.

literature

Michael H. Strickfaden: The German market of private higher education financing: are the existing products suitable to satisfy students' needs? , Marburg: Tectum Verlag 2009, ISBN 978-3-8288-2069-2