Sharp drop in number of student loans
The number of student loan agreements signed in 2015 has fallen by almost ten per cent compared to the previous year. What is more, students rarely use the maximum volume of credit available. In its Student Loan Test 2016, the CHE Centre for Higher Education analysed 39 different students loans and highlighted the criteria students need to watch out for when opting for a loan.
In the event of a funding shortfall, students can top up their grant (BAföG), scholarship or part-time job with a student loan or funding from an education fund. Whereas the number of customers grew steadily for years, fewer students in Germany are now taking up this option. Some 53,000 new student loan agreements were signed in 2015, a drop of almost 6,000 compared to the previous year. For the dominant loan on the market – the KfW Student Loan – this development equates to a minus of around 10 per cent.
“Considering the continued rise in student numbers, it is remarkable that the total number of student loans taken out has decreased significantly,” stated Ulrich Müller. The Head of Policy Studies at CHE believes that this development reflects a combination of factors: “It cannot be due to the increase in BAföG, which comes into effect in autumn. One reason for the decrease could be the fact that Bachelor and Master’s programmes have become more flexible, such as concerning attendance times and standard periods of study. It could also be the case that many students prefer to work part-time rather than get into debt.”
Student loan experts have also noticed that students are generally cautious and far-sighted when it comes to the subject of debt. In the case of the market leader, the KfW Student Loan, for example, the average loan amount is €521, rather than the maximum available amount of €650.
According to the CHE’s latest Student Loan Test 2016, students need not worry about the quality of the loans on offer. Many of the 39 investigated student loans and education funds gained top marks in several of the five categories (access, capacity, costs, risk mitigation and flexibility).
Even so, Ulrich Müller advises students to check exactly which option suits their individual requirements best. “With some providers, for instance, the interest rate for the repayment phase is only agreed upon after graduation. By then, however, the graduate is not in a particularly comfortable negotiating position because the repayment obligations already exist.” For this reason, the CHE expert recommends clarifying the matter of repayment arrangements before taking out a loan. After all, the interest rate for the repayment phase is related to the entire loan amount taken out by then – and the repayment phase is usually longer than the payment phase.
About the CHE Student Loan Test The CHE Student Loan Test 2016 was developed in collaboration with Handelsblatt. This year’s publication is the eleventh edition. Using 21 criteria, it assesses the advantages and disadvantages of 39 currently available student loans. The test is based on information given by the providers. The extensive detailed information contained in the publication gives students and prospective students a transparent overview of the market. The publication also contains tables that enable students to calculate their individual requirements. The CHE Student Loan Test is freely available at www.che-studienkredit-test.de
Further Information can be found in the publication stated below.