Those who are in academic education would ideally like to be able to concentrate fully on it. Many, however, need a source of revenue to cover the ongoing costs. A part-time job must be, which often makes the study time unnecessarily difficult. A loan is a real alternative here.
What is the loan?
A loan is a state educational grant, which is limited in time. The funding is awarded in the form of a low-interest loan to various groups of people. The credit should not be confused with the payments approved under the Federal Training Assistance Act (). The loan is an additional subsidy.
For the receipt of the credit, it is not relevant in which amount the income of the applicant or his parents exists. The purpose of the loan is to cover unexpectedly costs that are directly related to the type of training and can not be met by existing payments:
- study materials
- school fees
A loan is a state educational grant, which is limited in time. The funding is awarded in the form of a low-interest loan to various groups of people. (# 01)
How much is the loan granted?
The loan amount is paid out by the KfW, Kreditanstalt für Wiederaufbau. To enable the loan to students, the federal government acts as a loan bureau. This also allows the low interest rates of the loan.
The loan is paid for a maximum of 24 months within the training period. The payments are made monthly, the monthly installments can be 100 euros, 200 euros or 300 euros. The minimum loan amount must be 1000 euros. An applicant can receive a maximum payout of 7,200 euros.
It is not absolutely necessary to use the entire loan amount in successive payments. If, for example, two longer periods have to be covered by subsidies due to a costly field trip, they can be used independently of each other. It is not specified how much time must or may be between the payment months.
Who can use the loan?
There is no legal claim for the educational loan. The application is possible for several groups of people:
- Full-time students who are already in the penultimate year of training or beyond and who are seeking or already possessing a vocational qualification.
- Students who are already in an advanced training phase.
If the program does not provide an intermediate examination, the training center must provide a corresponding statement in writing. It must also be clear from this that the services provided to date have equaled a passed intermediate examination.
Students must have passed the intermediate examination of the program and continue to be in training (# 02)
Special features for the awarding of the loan
In addition to the basic requirements, there are a number of other framework conditions that must be taken into account for a successful loan approval:
- Applicants must be of legal age.
- Credit benefits can only be claimed up to the age of 36.
- Credit benefits can only be granted until the completion of the 12th semester.
An exception is students who are already in the 12th semester and are admitted to the final exam. If the educational establishment confirms that the completion of the degree will be beyond the 12th semester, the achievement can be extended accordingly. Students who are in the field of human medicine in a practical year, can also get beyond the 12th semester, the performance.
How can students apply for credit?
The application for the education loan can be submitted to students in two ways. It is possible to submit the required documents and forms in writing to the Federal Office of Administration in Cologne or online via the website provided by the federal government bildungskredit.de.
After examination of the documents, a notification of approval will be issued by the Federal Office of Administration. This is issued to persons who fulfill the eligibility requirements. This notification allows the applicant to sign a loan agreement with KfW.
The applicants will receive a ready-made contract offer together with the notification. From here, the students and apprentices turn directly to the KfW. If the contract is not sent signed to the credit institution within four weeks after receipt, the validity of the approval notice expires.
Does the educational loan apply to study abroad?
It is possible to obtain the education credit for studying abroad. There are no restrictions for the chosen country. Upon application, it is checked whether the foreign educational institution is equivalent to a German university.
It is possible to obtain the education credit for studying abroad. There are no restrictions for the chosen country. (# 03)
loan: repayment and interest
As soon as the student has received the first loan payment, four grace years follow. When the four years have passed, the repayment period begins. Irrespective of the amount of the loan or the current income, monthly installments of 120 euros will be charged. Ideally, you are already in permanent employment for at least one year and are able to bear the costs.
Since this is not a profit-oriented credit agreement, it is always possible to cover the costs by partial payments or a one-time payment. There will be no extra charges for special repayments.
Is a student loan worthwhile?
Although the interest rate is based on the general interest rate level, it far undercuts the value of traditional installment loans. In the second quarter of 2017, the interest rate was reduced to a nominal value of 0.75%. This was in line with the general decline in interest rates. The low interest rates keep the total cost of the education loan extremely low. Also in terms of fees, the cost structure is very favorable.
Anyone who is unable to cover the cost of the loan leaves the debt burden to the federal government. The KfW relies on the guarantee deposited by the federal government and secures the repayment directly. At a later date, the Federal Office of Administration will contact the borrower and try to collect the outstanding payments. The Federal Administration Office is very accommodating. It is possible to arrange rates that are appropriate to the individual financial situation.
What is the difference between an education loan and a student loan?
While the loan is a state subsidy, a student loan is a classic financial product of private finance. This means: The terms of the loan are fundamentally different from those of the loan.
For the approval of a student loan, the banks demand high collateral. Typical is the guarantee. It is often asked by the parents of the student. These guarantee that in the case of insolvency of the borrower to settle the defaults. In this context, it is important to know that banks have to follow a long process to implement the guarantee. It must be demonstrable that the bank has used all necessary means, including foreclosure, to recover the costs from the borrower.
In addition to the high level of collateral, it is above all the costs that make up a student loan. Even though interest rates are based on the general market interest rate, banks can pay the high default risk with corresponding fees. Compared to a normal installment loan, students must therefore expect special conditions.
However, the student loan by the bank also has a few advantages:
- Loan sum freely selectable
- Flexible terms
- Also available for freshers
- Not earmarked
The application for the loan includes the indication of a purpose of use. Although this may be quite general, it still has to be study-related. For the loan application for the student loan it is not absolutely necessary to name a specific purpose. Even if the use is explicitly requested, it is possible here to name reasons such as relocation or the purchase of furniture.
Are there alternatives to the loan?
Nationwide, there are more than 2000 funding institutes and foundations that specialize in providing training. Contrary to popular belief, foundations are not reserved exclusively for highly gifted students. It is quite possible to secure funding through one of these foundations.
Apply for loan only if necessary
Even though the granting of student loans is subject to a few conditions, in many cases it is possible to secure it without much effort. However, this should not mean that as a student you consider the funding opportunity as a simple source of income.
The credit burden has to be borne after four years and can then become a real nuisance. Therefore, it is advisable to use financial support of all kinds only if there is no other way out. This ensures a debt-free start into the world of work.