New figures from the Kreditanstalt für Wiederaufbau (KfW) have revealed just how significantly the coronavirus crisis is driving student debt. Students in Germany have already taken out nearly a billion euros in emergency loans - and will have to pay high interest on them from next year onwards. 

Student finances stretched by coronavirus crisis

With the coronavirus crisis having a major impact on student finances - making scarce the kinds of part-time jobs typically held by students to supplement their income, negatively affecting the incomes of those who give them financial support, or even forcing them to continue paying for accommodation and full tuition fees, even if they are now studying remotely - tens of thousands of students have applied for emergency loans over the past few months. In total, the KfW has received enquiries for loans totalling a value of almost one billion euros. 

This figure emerges from a letter sent by the Federal Ministry of Education to the budget committee of the Bundestag, which was made available to the German Press Agency. According to the letter, between May and September the KfW received around 30.800 applications for student loans, with a combined value of 919,6 million euros. That’s about four times as many applications in the same period last year. 

Loans offered interest-free and to international students

Since May, the loan has been offered interest-free. This regulation will apply until March 2021 and is intended as an aid measure during the coronavirus crisis. The loan offer has also been opened up to students from abroad for the first time, for the period of the interest exemption. 

In principle, students can apply for a maximum of 650 euros per month for up to 14 semesters - a total of 54.600 euros. The offer was initially presented by Federal Education Minister Anja Karliczek as “interest-free”, but she was quickly forced to backtrack and admit that this only applies to the payout phase. After this, interest payments are due. The current KfW interest rate is 4,16 percent - well above the market average. 

German politicians slam loans as a “sham”

This has drawn criticism from many sides. Andreas Keller, a university expert from the Education and Science Union, said that, in truth, the loan is “a perfectly normal bank loan that is sold as an interest-free loan, but in reality has to be paid dearly.”

Jens Brandenburg, university policy spokesperson for the FDP, also criticised the government’s aid as inadequate, slamming the “interest-free” label as a “sham”. “Already in April more than four percent interest will be due again,” he said. “This is not crisis-proof student financing, but a half-hearted new customer discount for the development bank.”