Studienkredit

For assistance in financing living expenses, a BAföG application should always be made first (except for non-EU foreigners who are voluntarily in Germany!!) before applying for a student loan!
The Studentenwerk in Saarland offers by far the cheapest form of student loan (see Social Funding).
For one-time payments (except for study fees), the Studentenwerk’s assistance fund is eligible.
So far, there is only an estimate of the commercial student loan from the KfW.

In cases of hardships, students can receive financial support from the social funding of the Studentenwerk from the third semester onwards. This fund is mainly intended for those who are not entitled to benefits according to the Federal Education and Training Assistance Act. The aid is granted in the form of a loan. There is no legal claim to support from the social funding.

The Studentenwerk maintains a relief funding for students of Saarland University who are in need through no fault of their own. There is no legal claim to benefits from the funding.

kfw-student loan

• must be requested online
• accessible for all courses of study
• can be applied for from the first semester onwards
• monthly between 100-650 €
• Must be repaid in full + interest

kfw-educational loan

• must be requested online
• a certain level of achievement is required (i.e. a loan for the second phase/ final phase of the studies)
• max. 300 € per month for 24 months

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Who hasn’t had that happen to them during their studies? Opening your wallet reveals a truly yawning void. The account is vegetating more than it’s flourishing – the pay for all the hours spent slaving away is a long time coming and, what’s more, it’s not really that generous.
“Oh no, it’s much easier!” says Anna. “There’s this new offer from KfW, the student loan. You get money in your account, it’s easy to fill out the application, and then you can pay it off in installments after you finish your studies – that’s great,” she continues. “And with really low interest rates,” adds Thomas, who has just been listening.
Sounds great – really tempting. But is the loan really as easy as it sounds and as many people talk about?

The KfW – Kreditanstalt für Wiederaufbau – offers its “student loan”. The disbursement phase can last from six months to seven years, there is also a “grace period” here, i.e. a phase in which repayment is not required, of a maximum of 23 months, and finally the repayment (“amortization”) can be stretched over up to 25 years – so far, so good.
The amounts paid out can vary between €100 and €650, there is a “low interest rate”, the loan comes without collateral (credit check) and the repayment can be flexible.

And there’s no catch?
Let’s take a closer look. The “variable” interest rate is currently “6.29% p.a. nom.” What does that even mean?

Variable means that the interest rate does not have to remain constant all the time, but can change (more on that later)
6,29% – this is the interest rate (current interest rate here)
p.a. means per annum and is translated as “per year”.
nom. stands for nominal; nominal is distinguished from effective. The effective interest rate (eff.)is the interest rate that accrues on the total debt. Since not everything is paid out to you (commissions, insurances,…), the interest rate calculated on the total borrowed money (incl. fees and insurances) is higher; then one speaks of the effective interest rate (eff.).

The effective interest rate for the KfW Student Loan is shown by KfW on its website as 6.34% p.a. eff. (as of 01/2008), “unless otherwise stated in the loan commitment”.

So why is the effective interest rate actually different from the nominal interest rate?
When the loan is concluded, the concluding bank, whether it is KfW itself or a “distribution partner” such as the Studentenwerk or a savings bank, receives a commission (“Aufwandsentschädigung”) in the amount of 232,-€, which the borrower, i.e. you, has to pay – with interest and compound interest. Since the actual debt is higher than the sum of what is paid out to you, the effective interest rate is also higher, because it includes the 232,-€ with compound interest.
The interest rate is “variable”, which means that it can change. KfW’s interest rate is based on the so-called EURIBOR (European Interbank Offered Rate – “It is the interest rate that European banks charge each other when trading deposits with a fixed maturity of one week and between one and twelve months.”; source: www.faz.net).
It is tantamount to a law of economics that interest rates rise when the economy picks up – and currently the economy in Europe, especially in Germany, is humming and there is no end to this upswing in sight – so in the medium term the interest rate will also rise.
6.29% p.a. – that’s the interest rate. This means that for a loan of 100,-€ borrowed on 1.1., 106,29€ have to be paid back at the end of the same year. At first glance, that doesn’t seem like much. If one considers however that equal at the beginning already times 232, -€ commission into the credit flow, then monthly at least 100, -€ are paid out, results alone for the first year the following amount (credit runs starting from 1.1.): 1487,10 €. For comparison: 100,-€ was paid out – monthly for one year, a total of 1200,- €.

Example calculation
To take an average value, let’s take the payment of 350,-€ as a basis and assume (although not realistic) a constant interest rate of 6,29% p.a. nom. Further we assume that it concerns a student, who lets himself pay out this credit over a period of three years (= 36 months) monthly.

After these three years there is already 12878,58€ of debt. So the student has after his six-semester study this sum of debts, without having borrowed money for the tuition fees.If the student now still the grace period (23 months) fully utilizes, he has already 14549,66€ debts to settle.So far is now the bachelor studies financed, but still no master, let alone a doctorate.After a subsequent two-year study to the Master of Arts, further monthly 350, -€ payment with constant interest results: 23222,16€.

But ATTENTION: These amounts come about under the assumption of a constant interest rate.Since, however, also here as mentioned at the beginning that the interest rate will rise, can be assumed as completely safe that also the interest rate for this student loan will continue to rise, and possibly even more than the tuition fee loans! – And thus, the debt will end up being much higher.

Don’t just take a student loan one semester “in between”!!!
While students with the tuition fee loan can decide each semester anew whether they want to take out a loan, and the grace period only begins to run after the end of their studies, the repayment with the KfW student loan already begins with the end of disbursement and it can only be decided every six months whether and how the loan will continue.
So if you only want to borrow a few euros in the first semester, you will be asked to pay at the end of the fifth semester at the latest, because by then the 23-month grace period will have expired! Consequently, you should always bear in mind that KfW will demand repayment of the loan 24 months after the end of disbursement at the latest, and this can be very annoying in the final phase!

To come back to the terms mentioned at the beginning: Student loan, student credit or even educational loan all basically mean the same thing, namely that money is paid out monthly that is freely available to the borrower (i.e. the student). A program for financing studies, on the other hand, can combine both the described student loans (or student credit or also educational loan) and a fee loan.

Although the above-mentioned conditions apply to the KfW student loan described above, it should be considered very carefully whether one wants to take out such a loan and accumulate such a large mountain of debt or whether there is not some other alternative.
In any case, a BAföG application should be made beforehand to check whether there is not still something to be taken out there, because BAföG is interest-free in any case and only needs to be paid back to a maximum of half.

Today, no one can make a reliable statement about how high interest rates will rise – only that they will rise. Although there are guaranteed interest rate ceilings for some loans, these are only fixed for a certain period of time, a maximum of 10 years.
People studying a subject in the humanities today do not have the best career prospects anyway (especially in terms of earnings in the first few years), as various studies show, but it also applies to everyone else that they should give plenty of thought to whether and if so, how much debt they want to take on.In addition to the KfW model, there are other offers from other (private) lending institutions.