Student loans: 50 million paid out to students each month
Around 100,000 individuals in Germany currently use a student loan to help finance their studies. The amount paid out monthly by creditors, such as banks and Student Services Organisations, totals around €50 million. These are the findings of the CHE Centre for Higher Education’s dedicated annual Student Loan Test.
According to the latest survey of loan providers conducted by CHE in June 2018, there were 280,000 active student loan agreements last year. Of those, some 180,000, i.e. two-thirds of borrowers, are already at the repayment stage. The other 100,000 individuals are still in the payout phase. Consequently, 3.5 per cent of all students currently make use of a student loan. In most cases, the borrowers receive funding − usually on a monthly basis − from a student loan or education fund to finance their studies. Students take out such loans to top up or take the place of a grant (BAföG), scholarship or part-time job, enabling them to finance their time at university.
According to the loan providers, the total volume of payouts currently exceeds €600 million annually. Consequently, a monthly average of approximately €50 million is paid out to students nationwide. The number of new student loan agreements signed fell by one-third between 2014 and 2017, from 59,000 to 41,000. The two market leaders, the KfW Student Loan and the Federal Office of Administration’s Education Loan, are affected most by this take-up decline. Last year, around 92 per cent of all agreements were signed with these two state providers.
For the first time, CHE additionally surveyed borrowers with regard to gender. Women now make up 47 per cent of contracts concluded. This is roughly equal to the proportion of women among the student population as a whole. Despite the fact that almost every second student loan is taken out by a woman, not all providers clearly regulate payout and repayment terms in the event of pregnancy and parental leave in their agreements.
An omission with long-term implications, stated student loan expert Ulrich Müller, in view of the up to 25-year repayment periods: “When on parental leave, it should only be the kids that keep their parents awake, not concerns about how to repay the student loan.” The Head of Policy Studies at the CHE Centre for Higher Education therefore calls for loan providers not to refer in such cases to “individual solutions” that have little legal standing in contract law. Deferrals or reduced instalments during pregnancy and parental leave should preferably be set out in writing at the contract signing stage.
The results of the CHE Student Loan Test 2018 show that all of the standard loans on offer in Germany are reliable and well designed. Many of the 46 student loans and education funds tested gained top marks in several of the five assessment categories (access, volume, costs, risk mitigation and flexibility).
However, the CHE Student Loan Test does not assess peer-to-peer loans, which are not offered by a bank, but via a web portal run by one or more private individuals. CHE Expert Müller urged students to be wary of such loans, stating: “Despite calling themselves ‘student loans’, students’ needs, such as monthly payouts and repayments, are sometimes neglected.” The quick, unbureaucratic processing of credit enquiries sometimes hailed as an advantage does not outweigh the disadvantages of interest rates that can be horrendous.
About the CHE Student Loan Test:
The CHE Student Loan Test 2018, developed in collaboration with Handelsblatt, was published this year for the thirteenth time. Using 21 criteria, it assesses the advantages and disadvantages of 46 student loans that are currently on offer. The test is based on information given by the loan providers. The wide range of detailed information provided in the publication gives students and prospective students a transparent overview of the market. In addition, tables can be used by 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 publications stated below.