Studying is an exciting time for many people. Independent for the first time, taking control of your own life for the first time. But the rising cost of living is also making life difficult for students. For many people the question arises: How am I supposed to afford all of this? If you’re lucky, your parents can help out. Not even 11 percent of all students receive BAföG and very few people have enough to finance themselves completely. A part-time job is part of it for most people; almost 70 percent of all students work alongside their studies. But the money is not always enough. For some, all that remains is debt, often with a student loan from the Kreditanstalt für Wiederaufbau (KfW).
An offer that seems attractive at first glance, especially when other options for financing your studies have been exhausted. No collateral is required to apply for a KfW student loan and there is no credit check. So whoever applies for the loan gets it. But as of October 1st, the interest rate on the loan rose to 9.01%, meaning it could become a debt trap for students.
The interest rate on the loan is based on the 6M EURIBOR, explains KfW. A so-called reference interest rate that is used for various loans and that has risen sharply since the Russian attack on Ukraine in 2022. This increase is now also reflected in the sharply rising interest rates on student loans, explains KfW. It adds a margin to the 6M EURIBOR, for example to cover possible defaults in repayment. KfW does not answer whether these are higher due to the lack of a credit check. But she emphasizes that she is not making any profit from the loan offer. Because it has to cover costs, its scope is actually limited.
Lena Balke from the Finanzwende initiative also says this. Nevertheless, she criticizes the development: “An instrument that should actually enable students to study independently of their parents is becoming a debt trap.” In any case, this does not promote equal opportunities. There are no concrete figures as to who exactly accesses the student loan. However, it can be assumed that students from households without an academic background in particular will now be more deterred than already from taking out loans, Blanken suspects.
Since taking office, Federal Education Minister Bettina Stark-Watzinger has never tired of emphasizing her ministry’s role as a “ministry of opportunity”. Blanken believes that the ministry is currently not living up to this promise. She calls on the minister to intervene now. So far there has been little comment on the sharply rising interest rates on KfW student loans. A spokesman for the minister told the Handelsblatt that there had been intensive exchanges with KfW, but that a reduction in interest rates was not possible and, with the current budget situation, support with federal funds was also not an option.
Both have already happened in the past, explains Blanken. In 2008, for example, Annette Schavan (CDU), one of the Federal Minister of Education’s predecessors, was able to achieve a reduction in the interest rate in discussions. During the Corona pandemic, the federal government even imposed an interest rate of zero percent on the loan and covered the interest accrued during this time from federal funds in order to take the burden off the students’ shoulders.
Students who took out the loan during the pandemic at the interest rate of zero percent at the time are now among those affected. Because the interest rate on the KfW student loan is flexible. Both during the payout and during the repayment. Around 263,000 people are currently in an active loan phase of the KfW student loan. 170,000 of which are in repayment. Although recipients can theoretically choose a fixed interest rate, most people opt for the flexible one. They are now also feeling the effects of the sharply rising interest rates.
Finanzwende has therefore started a petition and deliberately calls on the minister, not the KfW itself, to act: “If we want everyone to be able to study, then everyone must have the opportunity to finance their studies. With the high interest rates However, it is becoming more and more unfair.” This is precisely why something needs to change about the high interest rates, says Lena Blanken. The initiative deliberately does not present a clear plan of what exactly the minister should do about the high interest rates. The initiative believes that she should know this best.
