Amelie Zettelmeier decided on the KfW student loan. Getty Images / sittipong_srikanya / Natikka / Wang Yukun, collage: Falko Konitzki
Many people in Germany feel burdened by the increased cost of living. Students also suffer from the high prices; in 2021, over a third of them were at risk of poverty.
The KfW student loan can be an option for relief. But interest rates for funding are currently at a record high.
Amelie Zettelmeier is a student and has decided on such a loan. In an interview with Business Insider, the 24-year-old explains why she decided to do so, to what extent the interest represents a burden and how she plans to pay off the loan.
Crises, inflation, high prices: The increased cost of living in Germany is currently putting a strain on many people. Those who have a lower income anyway – such as students – are hit particularly hard. Information of the Federal office of statistics According to this, over a third (37.9 percent) of students in Germany were at risk of poverty in 2021. Among students who lived alone or in student shared apartments, more than three quarters (76.1 percent) were at risk of poverty. The values are therefore significantly higher than in the general population, where 15.8 percent were at risk of poverty in the same year.
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The KfW student loan can be an option for relief. But what happens when the relief itself becomes a burden? Because interest rates for funding are currently at a record high. While they were still at 3.76 percent in October 2021, they rose to 7.55 percent in April 2023, according to one Announcement from the Federal Government emerges. The effective annual interest rate is currently: 9.01 percent (As of mid-October 2023). And yet many students decide to take out such a loan.
Same goes for Amelie Zettelmeier. The 24-year-old lives in Nuremberg and is studying mathematics and economics to become a teacher at the Friedrich-Alexander University Erlangen-Nuremberg. She also works as a working student at a large DAX company. In an interview with Business Insider, she explains why she decided to take the loan, to what extent the interest is a burden – and how she plans to pay it off.
What is the KfW student loan?
The KfW student loan is a funding program from the Kreditanstalt für Wiederaufbau (KfW) and is aimed at people who are in an undergraduate first degree, second degree, additional, supplementary or postgraduate degree or master’s degree. People who are in the process of completing their doctorate, distance learning or part-time studies are also eligible.
The German development bank pays out between 100 and 650 euros per month, depending on the borrower’s needs. For a first or second degree, the maximum duration is 14 semesters, for postgraduate studies and a doctorate it is limited to six semesters.
“Since I started studying, I’ve always gone to work and somehow the money isn’t enough.”
Zettelmeier says she feels burdened by high inflation, rising rents and the cost of living. “It’s a strange feeling. Since I started studying, I’ve always gone to work and somehow the money isn’t enough.” Her standard of living isn’t that high and she’s already trying to save wherever she can. Although she lives in a relatively cheap area of Nuremberg, she pays 550 euros a month in rent for her 18 square meter room in a shared apartment. In addition, she spends around 250 euros a month on food, 200 euros on other expenses and 150 euros on leisure costs.
Since she also has to prepare for her state exams soon, she will soon not have the time to work 16 or 20 hours a week as a working student. “If I have to study soon, I need a lot of time. And then I thought, what can I do so that I have time to study and also get money, especially for rent or food.” She calculated that a combination of a mini-job and the KfW student loan would be financially beneficial it would be worth it. “Together with the loan, I will have about as much money per month as I earn now, but a lot more time for university.”
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“If I were to go into the overdraft every month, then I would also have to pay eight percent interest”
The young woman carefully considered her decision to take out a loan and calculated the costs in advance. The level of interest gave her pause and made her hesitate, she says. When Zettelmeier first thought about taking out a loan about two years ago, interest rates were significantly lower.
She also considered other options, she says, but she didn’t want to borrow money from her family and the award criteria for scholarships were very demanding. Zettelmeier also looked at other loans on comparison portals and compared conditions. Ultimately, however, the KfW student loan seemed to her to be the best option. “I somehow don’t see any other real solution. I need money, but I also need the time. And if I were to go into the overdraft every month to pay my rent, then I would also have to pay eight percent interest.”
Number of new student loans taken out falls to lowest level in over 15 years
Zettelmeier is not alone in her decision to take out the loan. According to a press spokeswoman for KfW, there are currently 263,000 borrowers from the development bank. 170,000 of them are already in the repayment phase, 93,000 are either in the payment or waiting phase. The latter describes the time between completing your studies and starting your professional life before repayment begins. Nevertheless, the number of newly taken out student loans in Germany has been declining for years Center for University Development found in an investigation. The only exception was the year 2020, when KfW temporarily lowered interest rates to zero percent due to the financial burden caused by the corona pandemic. In 2022, however, the number of newly concluded student loans fell to its lowest level in over 15 years with 23,820 contracts, while interest rates reached new highs.
It is still unclear at what interest rate Zettelmeier will repay her loan. Because the interest rate is Information from KfW basically variable and tied to the six-month Euribor. In the euro area, this acts as a reference interest rate for time deposits in interbank business. However, students have the option of opting for a fixed interest rate for the remaining term from the start of the repayment phase – provided it does not exceed ten years.
This is possible on April 1st and October 1st of each year. Borrowers can also determine the amount and term themselves up to a certain limit. Zettelmeier has opted for a term of 13 months with a monthly payment of 400 euros; her loan runs from February 1, 2024 to March 31, 2025.
“Above all, I’m relieved”
But how does the young woman see the future in view of the high interest rates on her loan? “I mostly feel relieved,” she says, and adds: “I know that the problem may have just been postponed a bit now, but I have the feeling that later on I will be more stable in life.” It is a great help that she could concentrate fully on her studies again without having to worry about her rent or buying groceries.
Zettelmeier doesn’t yet know when and how quickly she will pay off the installments. But she hopes to be able to pay off the KfW student loan shortly after completing her studies. “Because I have more time, I can learn a lot and complete my studies more quickly.” With a permanent position, she then wants to make the payments quickly. Your goal: pay off the loan in five years.
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