A student loan is a special financial product. It is a loan that is only granted to students. It is paid out to the borrower in the form of monthly payments. The loan was officially offered for the first time in 2005, initially by Deutsche Bank. Its introduction was carried out due to a change in the law that at the time enabled the introduction of tuition fees. The income-independent loan model for students remains an established component of study financing today. Student loans are mostly granted through the Kreditanstalt für Wiederaufbau (KfW) — which is why the term "KfW loan" has also become commonly used.
In general, students have two basic options. On the one hand, BAföG can be applied for. This support is financial assistance for students whose parents are not able to finance their education. This support can already be claimed during school. On the other hand, students can take out a loan. Student loans have been available in various options since 2005:
- KfW student loan
- db student loan from Deutsche Bank
- Graduation loan
- Study funds
KfW student loan
The Kreditanstalt für Wiederaufbau has existed since the end of World War II. As the name suggests, it is the task of this financial institution to finance the reconstruction of the German economy. In the meantime, the development bank also offers a student loan. The loan is intended to finance students' living expenses so that they are not forced to work during their studies.
The loan is available in two forms. It is granted as an interest-free loan for students from low-income families; this is a supplement to BAföG that increases the total amount by 50%. And it is offered as a classic student loan, which is a normal loan with full interest.
Deutsche Bank - db student loan
Students at German universities of applied sciences and universities were able to apply for the db student loan up until 2013. It did not matter which course the student was enrolled in. The loan is no longer used for new applications. Deutsche Bank now works with the KfW and currently distributes its financial product.
Graduation loan
The graduation loan has been granted since 1921 and is thus the oldest official student loan. This loan is not offered by every university and not in all regions. It is intended to support students with living costs during the final phase of their studies. These offers are very favorable during the exam period. The loan funds usually waive processing fees and work with a low fixed interest rate.
Study funds
Study funds are offered not by banks but by companies and corporate groups. The funds for financing come from private investors. An individual selection process is used for granting the funds. Accordingly, the amount, duration and costs of the loan are flexible. The amount of the repayment is determined based on income after graduation.
In addition to loans, scholarships and BAföG are also available to pupils and students.
Study financing: How do I finance my studies?
Ideally, students can rely on support from their parents. However, this is not always possible. It becomes particularly difficult when the course of study involves high costs, for example due to moving to a new city. To be able to fully concentrate on their studies, students should avoid part-time jobs. Nevertheless, this is unavoidable for many. Students in Germany are offered a number of funding options. When choosing, it is important to find an option that provides sufficient financial resources.
Study financing: Can everyone afford to study?
Equality for every German citizen is anchored in the principles of the constitution. This also applies to the area of education. To enable this, options are available to every German citizen and to the majority of foreign residents to finance studies, regardless of individual financial circumstances. The right combination of grants and (if necessary) a personal income is generally sufficient to finance a course of study. It is important to note that compromises may sometimes have to be made, for example regarding the place of study.
Study financing compared: Student loan, scholarship, BAföG or education fund?
Providers of student loans and other study financing are generally divided into state and private institutions. In addition, financing is available in various types:
- Tuition fees
- One-off payments
- Living expenses
- Graduation loan
The specific conditions for the individual offers determine whether the financing route is accessible and suitable for the student. If several options are interesting, possible additional benefits and the maximum funding amount should be taken into account. Finally, the costs are an important factor.
What should you consider when choosing study financing?
Interest rate: For a meaningful cost comparison, the effective interest rate must be considered. This includes all costs incurred for the loan. If the student loan is tied to a variable interest rate, costs can change over time. If the loan was concluded at a very low interest rate, costs are often adjusted upwards.
Income-dependent repayment: If the amount for the monthly repayment is adjusted as a percentage of current income, a direct comparison with interest-bound offers is hardly possible. The stated percentage should not be set too high. If a medium starting income is to be expected in the chosen profession, a high repayment percentage could be very burdensome.
Fee structure: Processing fees or the addition of other financial products can greatly affect the total cost of the loan. It is important to know all cost factors in detail before signing a contract.
Repayment period: The longer the repayment lasts, the higher the total costs of the loan. This applies especially to offers with interest payments.
Grace period: To ensure an appropriate entry into the professional world after graduation, lenders offer a grace period. During this period, no repayments are expected. In some cases, the grace period is up to two years.
Student loan costs & interest - How much does a loan cost?
The actual costs of a student loan consist of several factors. The total amount includes the funded amount, the interest incurred and the processing fees. The minimum payout is 100 euros per month and it cannot exceed 650 euros. Depending on individual circumstances, the payout period can vary — the maximum total payout is set at 54,600 euros. The interest rate is determined anew each semester. The one-time fee calculation for administration and effort is around 280 euros.
The KfW student loan
Terms for a KfW student loan
When granting a KfW student loan, there is no credit check. The bank also refrains from taking collateral. However, if the applicant is currently in personal bankruptcy, the application can be rejected. The following groups of people can apply for the loan:
- German students at a state-recognized university
- EU foreigners who study at a state-recognized university
- Educational residents who are enrolled at a recognized university
- The application must be made before the applicant's 44th birthday
Although the capital is provided by the KfW, there are a number of distribution partners, including Deutsche Bank.
How high is the funding of a KfW loan?
The monthly payout amount is between 100 euros and 650 euros. The interest accrued is already charged during the payout phase. The actual amount is therefore determined individually for each student and loan contract. From the 6th semester onward, the borrower can apply for deferred interest.
How long is the funding period for a KfW loan?
The payout duration can be distributed over a maximum of 14 semesters. If the student is over 34 years old at the time of application, this period is shortened to ten semesters.
How does repayment work for a KfW loan?
When the studies are completed, there is a repayment-free period. This grace period can be between six and 23 months. Once the first repayment is recorded by the bank, the borrower is granted a repayment period of 25 years. Within this time, the monthly amounts can be determined individually — each time for an entire semester. A minimum amount of 20 euros must be paid.
Advantages of the KfW student loan
- A clear advantage is the eligibility criteria. It does not matter what or where you study. It is also irrelevant how high your own income or that of your parents is — the interest rate does not change positively or negatively because of these factors.
- No credit check or proof of need is required. EU citizens aged 18 to 44 can apply for the loan to finance a full degree, a doctorate or further training.
- Twice a year it is possible to fully repay the entire loan amount without incurring special costs (each on April 1 and October 1). The variable interest rate is also a clear advantage. It is determined anew every six months and set in conjunction with a fixed interest rate cap. The cap is contractually secured for up to 15 years.
- It is possible to combine the student loan with other funding options, for example BAföG or an education loan.
Definition - Education loan
An education loan is granted as part of the federal Ministry of Education and Research's education loan program. The loan can be applied for by pupils, students and people in further training.
Disadvantages of the KfW student loan
- It is necessary to submit proof of academic achievement during the study period. If these are not provided, the continuation of the loan payment is not guaranteed. These proofs must be submitted regularly from the 5th semester — there are specific proofs required for each course.
- If the student takes more than two semesters off, payments may also be suspended.
BAföG
BAföG framework conditions
BAföG is a state grant. To secure the monthly payment, a number of conditions must be met. The most important questions are answered below:
Which trainings are supported by BAföG?
Study BAföG can be applied for full-time study at all publicly recognized universities and technical colleges. It is also suitable for financing consecutive master's degrees.
Who can apply for BAföG?
German citizens who are enrolled in a course of study. Applications are accepted in a restricted way from the age of 30 (up to 35 for enrollment in master's programs). Under certain conditions, foreign students are also eligible for funding.
How high is the BAföG funding amount?
The individual funding need is determined by the authority. A number of factors come into play: Do you still live with your parents? How high is your parents' income? What kind of training is to be funded?
How long is BAföG paid?
The payment period is based on the standard period of study. In exceptional cases, extended payments can be applied for.
How is BAföG repaid?
Half of the BAföG payments is pure support, which does not have to be repaid. The remaining 50 percent is an interest-free loan. Repayment begins within five years after the last installment payment.
BAföG - Advantages
State funding is the cheaper option compared to a student loan. 50% of the costs are completely covered for the student. The long grace period after graduation also facilitates an adequate entry into professional life. The application takes individual circumstances into account and secures a financial rate that matches personal needs.
BAföG - Disadvantages
Approval can already be negatively influenced by small factors. The basis for calculation is not always able to correctly assess all circumstances. For example, if parents have a high base income but at the same time are burdened with high financial obligations, these may not be taken into account for the grant allocation.
Other study financing options at a glance
Scholarships
Scholarship advantages
- High funding amounts
- Many additional benefits (teaching materials, excursions, semesters abroad)
- Individual support
Scholarship disadvantages
- Very high performance requirements
- Limited availability
- Often specific to certain courses
Education funds
Education fund advantages
- Private investors provide high capital
- Many additional benefits possible
- Amount and duration are variable
Education fund disadvantages
- Strict allocation criteria
- Often regionally limited
Who can get a student loan?
In principle, every student in Germany has the opportunity and the right to apply for the loan. Since there is no credit check and no collateral is required, the first hurdle is easy to overcome. However, there are a number of conditions that must be met for a successful application. It is always possible to submit special applications. In special cases, loans are also granted to people who were rejected after an initial selection process. These cases are considered individually and personal circumstances are evaluated.
Student loans for students over 30?
Applicants must have submitted the necessary documents before turning 44. Unlike BAföG, it is therefore possible to secure study financing after the 30th birthday without problems. It does not matter whether you are in an undergraduate or a master's program.
Student loans for students abroad?
A basic requirement for approval is that the student's primary residence is in Germany. It is therefore possible to use the loan for a semester abroad. However, it is not possible for Germans living abroad to finance studies at a foreign university. This also applies if you live in a neighboring EU country but study at a German university.
Student loans for foreign students?
EU foreigners with a primary residence in Germany can apply for a student loan. The same conditions apply as for German applicants. Non-EU foreigners do not have the opportunity to apply for a KfW loan.
Tip - Study financing for foreigners
More and more banks offer classic loans for students. The credit check for these products is tailored to the special circumstances of students. This means that it is usually necessary to demonstrate employment. This allows the bank to assess the applicant's ability to pay. The costs for such a loan are higher compared to the KfW loan.
Student loans for a second degree?
It is possible to finance a second degree with a student loan. If there is already a loan for the first degree, an additional loan payment can be applied for. It is also possible to use the application only for the second degree. In both cases, it is important to provide the necessary proof of achievement for the first degree. If the required proofs are not available, this can lead to rejection.
Student loans for guest auditors?
Approval of a student loan is tied to official enrollment in a full-time degree program. Guest auditors do not hold an official student status and therefore do not qualify for a student loan.
Special case - Guest auditors
There are a number of reasons why people attend the university as guest auditors. For example, a person may currently be obtaining the required Abitur qualification through distance learning or evening classes. To find a quick entry, these students often use their free time to attend the university as guest auditors. In such cases it is possible to apply for funding in the form of student BAföG.
Student loan for students beyond the standard period of study?
The student loan is paid out for a maximum period of 14 semesters. During the payout phase, proof of achievement must be provided — however, these are not strictly tied to the standard period of study. It is possible to exceed the standard period of study and still receive payments.
Are student loans an alternative to BAföG?
In a direct comparison it quickly becomes clear that both financing options have advantages and disadvantages. If you are able to securely finance your studies with the granted BAföG, a student loan is not interesting. BAföG is the cheaper financing. However, if you need financial support outside of BAföG, a student loan is a good choice. In many cases it is the only way to secure a monthly income.
Who is a student loan interesting for?
Students who have a secure financial backing can concentrate on their studies without worries. This often results in a better final grade and a shorter study period. If financial backing is not provided by the family, several options are available:
- State grants
- Student loan
- Scholarships
- Student jobs
The cheapest option is BAföG. The grant is often sufficient to cover study costs and living expenses. Unfortunately, it is not paid beyond the standard period of study. In such a case, applying for a student loan is a good solution. If BAföG is not approved, students can also use the loan from the first semester.
Use BAföG and KfW loan at the same time?
The KfW loan can be applied for in addition to existing study financing. If the BAföG payment is not sufficient, the KfW loan is a good option. It is also possible to take out the loan in addition to scholarships or education loans.
Are there student loans as a one-off payment?
The KfW loan cannot be taken as a one-off payment. It is always provided in the form of monthly payments.
Applying for and terms of a student loan
Where is a KfW loan applied for?
A KfW loan can currently be applied for at various KfW distribution partners. These include all major German banks. It is possible to obtain the KfW loan at your Sparkasse or Deutsche Bank branch. The lender in this case is still KfW.
To ensure uncomplicated processing, it makes sense to check with your house bank whether an application can be submitted through the branch. Money and the application are thus managed in one place. This can, under some circumstances, slightly optimize processing time.
An application can also be completed online. A corresponding tool is available on the KfW website. It is important that the application is filled out completely and correctly. Submitting all documents is also required for successful processing.
How long does it take for a KfW loan application to be processed?
Regardless of whether the application is handled online or through a distribution partner, the monthly cut-off date is always the 15th of the month. Applications that arrive at KfW by the 15th of the month can theoretically start financing from the next first of the month. If there are queries or the documents are incomplete, the payment start can be delayed accordingly.
Why can a KfW student loan be rejected?
Formal inconsistencies can lead to rejection of the application — if it is merely missing documents or incorrect information, this can be remedied by revising the application. Legal grounds for application rejection are:
- The applicant has given a sworn declaration according to § 807 of the Code of Civil Procedure (ZPO) or § 284 of the Fiscal Code (AO).
- There is a detention order to enforce the sworn declaration.
- The applicant is in personal bankruptcy.
- An out-of-court debt settlement procedure is pending.
In addition, it may be the case that the required proofs of achievement are not available at the time of application. These must be submitted regularly and on time from the 7th semester for first and second degrees. If financing is applied for a postgraduate, additional or supplementary degree, or a doctorate is to be financed, a relevant proof of academic qualification must be provided. If this is not available, financing cannot be approved.
Those who use the help of a distribution partner should assume that incomplete applications will not be forwarded to the bank. In case of possible queries, it is possible to contact the bank directly.
Important: There is no legal entitlement to receive a KfW student loan.
Which documents must be submitted for a KfW loan application?
- Valid enrollment certificate for the requested financing start.
- The enrollment certificate must state the subject, semester and intended degree.
- Identity card or passport and registration certificate must be included.
- Foreign students must provide the corresponding form.
- Proof of bank account is important.
- From the 6th semester, proof of achievement is required.
- "Proof of academic degree" for applications for further education.
Is there an application deadline for the KfW loan?
The loan can be applied for at any time. To secure a payment for the following month, the application must be received by KfW by the 15th of the month.
How does the KfW loan work for higher semesters?
The loan can only be applied for up to the 10th semester. It is no longer possible to apply for the period from the 11th to the 14th semester.
KfW payouts - What do you need to know?
- The first payout is requested in the full amount of the agreed monthly payment.
- From the second payment, interest is charged monthly — the payment is lower than in the first month.
- From the 6th semester, an interest deferral can be requested until the end of the grace period.
- The payout amount can be adjusted for the coming semester at the end of the semester.
- A cancellation is possible monthly up to the 15th. In the following month there will be no payment.
- After approval of an interest deferral, payouts can be set to 0 euros and increased again if required.
Can a KfW loan approved for the first degree also be used for a second degree?
It is possible to transfer the loan to a second degree. The required documents are submitted via the distribution partner or directly to the KfW bank. The usual deadlines at the end of the semester also apply here.
When do you receive the last payment after graduation?
Payments must be canceled by the borrower; this should be done before the end of the maximum payout period. It is not necessary to provide proof of graduation for this. If the payment is canceled by the 15th of the month, it will no longer be credited from the following month. In general, it is not possible to secure payments for more than 14 semesters.
Termination and repayment of the student loan
What happens if the loan is no longer needed?
Early termination of the loan is always possible. To avoid affecting the start of the repayment phase, an interest deferral should be requested. If this is secured, monthly payments can be reduced to 0 euros. The loan amount will thus not be further increased. On request it is possible to increase the amount again within the payout period. Without the interest deferral, a minimum payout of 100 euros must be taken.
If the loan is completely terminated, the grace period comes into effect immediately. The first repayment installment is due within 6 to 24 months. It is possible that the first installment is payable while still studying. In this case, the installment can be reduced to a minimum of 20 euros.
Are special repayments possible for the KfW student loan?
Special repayments can be made at any time. If this happens during the payout phase, the amount is offset at the end of the grace period. No special costs are incurred for repayment. On request, it is possible to repay the entire loan amount early.
Is it possible to extend the funding period for the student loan?
The maximum funding period is always set at 14 semesters. Students who applied for the loan after the age of 30 have a contractually defined term of 10 semesters. This can be extended to 14 semesters on request. For this purpose, it is necessary to submit an enrollment certificate during the 10th funding semester. This must confirm that the degree is expected to be completed within the following four semesters. An application for extension of the loan term must be submitted before the end of the last regular roll-over period.
Definition - Roll-over period
Loans with a variable interest rate are redefined every six months. Within the six months, the interest rate is fixed. This period is described as the roll-over period. A KfW student loan works with the following time windows: 01.04. to 30.09. and 01.10. to 31.03. of a year or the following year.
Note: The data of the enrollment certificate for the 11th funding semester can only be entered into the KfW online loan portal after processing an extension application. The portal indicates successful processing.
How long is an enrollment certificate valid?
The enrollment certificate is issued by the university. Its validity expires at the end of the semester. If there is no current enrollment certificate in the KfW online portal, this can lead to suspension of financing. If an enrollment certificate that is valid for more than six months is available, it must be confirmed by a distribution partner and submitted to the KfW bank.
Is it possible to take a semester off during the funding phase?
Borrowers are allowed up to four semesters off for the KfW loan. Payments are suspended for this period. No additional costs are incurred. As soon as a 5th semester off occurs, the loan automatically enters the grace period. It is not possible to take up the loan again afterwards. The student must be enrolled during the leave semesters. Appropriate certification must be provided.
KfW loan repayment - The facts at a glance
- Unless otherwise requested, the loan goes into the grace period after the 14th funding semester.
- The grace period is a maximum of 24 months.
- Monthly repayments must be at least 20 euros, provided this covers the total costs within 25 years.
- Monthly payments can be adjusted every six months.
- Special repayments are possible at any time without additional costs.
Are the costs of the repayment installments of the KfW loan dependent on income?
Installments are set individually by the borrower. If the installments are sufficiently high to cover the costs within 25 years or until reaching the age of 67, KfW automatically approves them. Income level does not matter.
The bank calculates interest on the outstanding loan amount. The longer the repayment takes, the higher the total costs of the loan.
What happens in the event of insolvency?
If there are financial bottlenecks during the repayment phase, using the minimum payment is the best option. If this is not possible, the borrower should contact KfW early. An individual solution is usually found based on current financial evidence. Personal bankruptcy also affects the student loan. It is discharged as part of a completed insolvency proceeding.
Are parents liable for repayment of the student loan?
Student loans are granted exclusively to adult and legally capable persons. The main borrower is therefore solely liable for the loan amount. Parents cannot be held liable for outstanding claims.
Is the KfW student loan subject to garnishment?
Since there is no credit check for the granting of a student loan, the lender cannot see whether a garnishment order exists for the borrower. It is therefore possible that monthly payments are approved while a garnishment is pending.
Whether the amount from the student loan is garnishable depends on various factors. Among other things, it matters whether the student loan is the sole source of income. To be able to seize an account, a sufficiently high monthly income must be available. If this is not the case, garnishment (regardless of amount) is not possible. The maximum limit of 650 euros for the loan is below the garnishment threshold.
If the amount is nevertheless debited from the account as part of a garnishment, a certificate of exemption can be requested. A court order is required for this. This exemption is not generally issued for an account. In the worst case, it is necessary each month to reclaim the garnished amount anew.
Are the installments (repayment) of the KfW student loan tax-deductible?
Repayment installments for the KfW student loan consist of the loan amount and the interest incurred. Only the interest can be claimed as special expenses in the tax return. They are considered training costs.
There is the option of paying the interest with a lump sum. If this option is used, the amount is only taken into account in the tax return in the year of repayment.
Does dropping out change the conditions for repayment of the student loan?
If you drop out of your studies, you are no longer entitled to funding. At the latest by the next enrollment certificate due date, the bank will suspend monthly payments. From that point on, the grace period begins. Repayment is therefore not affected. The same conditions continue to apply. This also applies to BAföG payments.
Note: It is often reported that an above-average or early graduation affects BAföG repayment costs. Such partial remissions were indeed granted in the past. Currently, the legal situation for partial remissions is somewhat complicated — this applies mainly to degrees with good grades.
It is still possible to obtain financial advantages for an early graduation. The statutory deadlines for applying for a partial remission of BAföG must be strictly observed. If the deadline has passed, a late application is no longer possible.
General questions about the KfW student loan
Can you have an income during the payout phase of the student loan?
The applicant's financial situation is not considered for granting. During the payout phase, the financial situation is not queried. It is therefore possible to work without the payout amount being adjusted. However, it makes sense to reduce the loan amount if income from other sources is available. This reduces the financial burden. The higher the loan amount, the higher the total costs of the student loan.
Which distribution partners are there for the KfW student loan?
The range of distribution partners has grown strongly in recent years. In the years after the brief introduction of tuition fees, there was a wave of new financial products for students. However, much of this was discontinued again fairly quickly. Banks like Deutsche Bank or Sparkasse therefore decided to act as distribution partners for KfW. In addition, there are the following partners:
- Student services organizations
- A variety of major German banks
- Online portals
On request, the loan can be applied for directly through the bank.
Does the KfW loan have to be applied for through the house bank?
No, it is not necessary to commission the house bank with processing the loan application. However, for many people it is the simplest route. The bank advisor is available for questions. It is worth arranging an appointment at the local branch for a consultation. All questions about the KfW loan can be clarified there.
Is a KfW student loan usable for a distance learning course?
If the distance learning course is completed at a German university and the student's primary residence is in Germany, the student loan will be approved if the basic requirements are met. The requirements for distance learning do not differ from those for classic university studies.
Student loan for students who live with their parents?
As long as the registered primary residence is in Germany, specific living circumstances are not taken into account. Students who live with their parents can apply for the loan. In general, the financial circumstances are only considered for the applicant. A loan will therefore also be approved if:
- the partner has a stable income.
- the spouse provides financial security.
- monthly expenses are extremely low.
- there are financial obligations in the form of maintenance payments.
The student loan - The important facts at a glance
- Financial support for first and second degrees as well as follow-up courses and doctorates.
- The monthly payout amount can be flexibly adjusted - 100 euros to 650 euros.
- No credit check is required. It is an income-independent loan.
- Flexible repayment at low cost.