University - Demand for student loans continues to fall
Students and students are using fewer study loans and education funds, according to an analysis presented on a Wednesday in Gütersloh by the Center for Higher Education (CHE. In 2023, only 16,564 customers signed new contracts for a study loan or education fund. This is more than 7000 fewer contracts than in the previous year, representing a decline of over 30 percent. Compared to the past ten years, the number of new contracts has dropped by nearly 72 percent. Study author Ulrich Müller speaks of a significant decline following a brief surge during the Corona pandemic. "The market for study loans is losing significance at an alarming rate, study loans are developing into a niche product," Müller said in a statement.
The CHE expert sees high interest rates on the market-leading KfW study loan as the main reason. The number of new contracts with 8,900 has almost halved in comparison to 2022. "I cannot recognize in the design of the conditions or in the setting of interest rates that the Federal Government wants to offer an attractive study financing option with the KfW study loan. With an interest rate that temporarily exceeded 9 percent, no new customers are attracted," so Müller.
Regarding the state-owned promotional bank, it was stated that the KfW study loan is not a classic promotional product but an offer financed by the KfW itself. "The KfW does not make a profit from the study loan but covers costs exactly, including default risks and processing costs." The interest rate is set semi-annually, on the first of April and October. As of the 1st of April 2024, interest rates in the KfW study loan have slightly decreased. They currently stand at 7.51 percent for new contracts.
No offer is below a 4.87 percent effective interest rate in the repayment phase according to the market comparison. Currently, 213,000 people are repaying their study loans in Germany, 45,000 students are currently receiving them. They receive an average of 535 Euros per person. Their share is 1.5 percent of all students.
The CHE is a joint venture of the Bertelsmann Foundation and the Conference of Rectors of German Universities (HRK).
- Despite the decline in student loan and education fund contracts, as revealed by the Center for Higher Education (CHE) in Gütersloh, the current interest rate on the market-leading KfW study loan is deterring potential customers.
- The CHE expert, Ulrich Müller, attributes the drop in new study loan contracts, from 24,464 in 2022 to 16,564 in 2023, to this high interest rate.
- The KfW Banking Group, a promotional bank owned by the German federal government, is the provider of the KfW study loan.
- According to Müller, the KfW study loan is not a traditional promotional product, but one financed by the bank itself, with the KfW covering all costs, including default risks and processing costs.
- Amidst the ongoing decline in student loan contracts in North Rhine-Westphalia and across Germany, the CHE, a joint venture of the Bertelsmann Foundation and the Conference of Rectors of German Universities (HRK), is monitoring social affairs and the financial well-being of students.
- With the start of a new repayment phase on April 1, 2024, the interest rate for new KfW study loan contracts has slightly decreased to 7.51 percent, falling from a high of temporarily exceeding 9 percent.
