High interest rates cause demand to collapse

The state-owned KfW, which grants almost three quarters of the loans, has just raised the interest rate to four percent from 2023 – further interest rate increases are foreseeable. The federal government will only cover the interest costs as part of the corona aid until the end of September.

Author Ulrich Müller also attributes this to the higher interest rates. A total of around 76,000 students are currently taking out a loan – in 2018 there were almost 100,000. Almost 200,000 are currently in the repayment phase.

“Fixed interest rates are now all the more important for students’ planning – so that they don’t have to take any incalculable risks,” recommends Müller. But with the dominant KfW, of all things, this is not possible during your studies – and during the long repayment phase only for a surcharge. In the last phase of high interest rates, when interest rates reached values ​​above six percent, the federal government capped the interest on the KfW loan.

Instead, the CHE is promoting a complete overhaul of the entire student financing system: “It is long overdue for the federal government to finally create an attractive range of student loans – because the need is definitely there,” demands Müller. “There are actually no more excuses for that.” This applies all the more since the banks have long since withdrawn almost completely from this market.

Best interest rate: The loan from the Federal Office of Administration

“What is more effective than an investment in education? Especially since it will also be repaid,” argues the CHE credit expert. Depending on the offer, the failure rates would only be a few percent.

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According to the CHE, a complete package consisting of student loans, a KfW loan and the little-known, very cheap educational loan from the Federal Office of Administration for higher semesters would be ideal. Federal Education Minister Bettina Stark-Watzinger (FDP) has already announced a major structural reform of student loans. There are no details yet, but the coalition agreement gives hope: “We are aiming to open the interest-free Bafög full loan to all students,” it says.

This is urgently needed because even after the recent increase in the allowances for student loans, “only a very limited number of students have a chance of receiving student loans,” says Müller. On this occasion, an offer must finally be created for students at private universities – meanwhile at least ten percent of all students – so that they can finance not only the cost of living with loans, but also the sometimes lavish fees.

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On average, students are taking out loans of over 532 euros per month this year. This value has hardly changed compared to 2020/21. “It has not yet been observed that students are borrowing noticeably higher sums due to inflation”. In addition to the KfW, the Sparkasse Herford is the last of its kind to offer classic student loans. There, the effective interest rate rose to a whopping 5.11 in the repayment phase.

On the other hand, the interest rate of 0.62 percent for the loan from the Federal Office of Administration for higher semesters, which is still the second most frequently used after the KfW, is “unbeatably cheap”. According to Müller, the fact that there is less and less demand for it is simply because “the maximum monthly payment amount of 300 euros is simply not enough”.

Only the offer of the EG chances, which is based on the model of the University of Witten-Herdecke, is developing splendidly. The basis is the “reverse generation contract”: The repayment depends on the income of the ex-students – which can be expensive with top salaries. On the other hand, if you earn less than 27,000 euros gross, you don’t have to pay anything back.

There are also loans for foreign students

The assessment by the CHE is extremely good – also because the Chances EG has recently started to finance living costs in addition to tuition fees. “Although they have only been in business since 2016, they are growing continuously because they benefit from the many years of experience in Witten-Herdecke and the good reputation it has gained,” says Müller. “As investors know that this is not a flash in the pan.”

There are also income-related repayments for the other education funds. The condition here, however, is usually a successful degree. Here, too, the “Chancen EG” is “an exemplary exception”: In the event of a student dropping out, the payments are terminated there and the repayment conditions are adjusted to the payments made.

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The CHE rates the new offer from the start-up Lendorse as “very interesting”. With its income share agreements, it focuses on students from outside the EU and students with a migration background. This is “remarkable, because other providers deliberately exclude the target group of non-EU foreigners”.

However, there are no monthly payments at Lendorse, instead the total amount is paid out in one sum at the beginning. The background is that international students sometimes have to have several thousand euros ready for the visa at the beginning.

After that, however, there is actually no reason for it, says Müller, especially since it “puts increased demands on the financial discipline of the students”. It also remains to be seen how the start-up intends to ensure repayments if at least some of the customers return to their home countries after their studies – and are therefore considered too risky by other providers.

Politically, the now 330,000 foreign students are considered to have the ideal potential to attract them to the German job market. However, they drop out of their studies more often than natives. According to surveys by the DAAD, one reason for this is financial problems. The new offer could help here.

More: All data on all providers can be found in the detailed credit test of the CHE

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