Student loans in Germany: "All that glitters is not gold"
The latest CHE student loan test 2013 reveals that a total of 850 million euros are available for student loans in Germany. The test also tells students what they need to be aware of before signing a student loan contract.
A total of around 850 million euros are available for student loans in Germany. The money comes from public-sector providers, Studentenwerken (student service organisations) national banks, regional saving banks and co-operative banks as well as educational funds. Most popular by far are two public-sector offers: one half of all contracts concluded in 2012 were KfW student loans that with a total monthly pot of 650 euros now also finance second degrees, further training and PhD projects. The Federal Administration Office’s education loan, which is intended to help students in advanced study phases to finish their courses, registered 19,000 completed degrees.
The various student loan offers not only differ markedly in terms of costs, with interest rates ranging from 1.33% to 8.90% (effectively), they are also aimed at different target groups. Ulrich Müller, project manager at the CHE Centre for Higher Education Development said: “As far as student loans are concerned, all that glitters is not gold. Interested students should scrutinise whether the conditions offered match individual needs and they should study the small print carefully."
The interest rate in the repayment phase, for example, will not be agreed by some providers until after the course has been completed. Deutsche Bank as well as the Essen, Herford, Leipzig, Lübeck and Bodensee savings banks leave repayment conditions open at the time the contract is completed and only fix the interest rate to be applied when the loan is due. However, the repayment interest rate is a key determining factor, as it applies to the total loan sum paid out so far and repayment takes much longer than payout. Mr Müller said: "The borrower needs clarity and security from the beginning. Students who have completed their studies should be able to focus on entering the professional world."
The student loan test 2013 was compiled and published in co-operation with the Handelsblatt newspaper. Using 21 criteria, it evaluates the pros and cons of existing student loan offers for different target groups. It helps interested students take the right decision and makes the student loan market more transparent for all those involved.
Further Information can be found in the publication stated below.