Rising Interest Rates on KfW Student Loans Threaten to Force Students to Drop Out of College

by Mandy Sarti

The KfW student loan is intended to enable young people to study: For example, when there is no money or they do not receive BAföG. However, within a very short time, the interest rate on the loans has almost doubled. While it was still 3.76 percent in October 2021, it has now risen to 7.82 percent. For students, this increasingly means financial worries.

Mental stress and sleepless nights

Denise Rabe knows how great the pressure is. The student teacher from Hanover took out a loan from KfW in 2016. Total: 16,000 euros. Without the money she would not have been able to study. “I needed the money to finance my rent and my life,” she says. The KfW transfers you 500 euros per month. She has to make do with the money. In the first year, she only pays back interest – 50 euros per month. At the time, she was not yet paying off the actual debt. For Denise Rabe, who had just started her Masters at the time, it was a financial tightrope act. She tells of sleepless nights, permanent mental stress. “My thoughts have only revolved around how I can pay back the money.” The student teacher sees herself in a debt trap. “I have thought several times whether I can continue studying at all.” On several occasions she was faced with the decision of giving up her studies in order to work and pay back the money.

Student unions are demanding interest caps

Denise Rabe is not alone in this. The student unions in Lower Saxony are alarmed. You have to send students to debt counseling more and more frequently. In Hanover, advisors no longer recommend student loans at all. The financial burden is far too great – the KfW loan is not a suitable option for financing one’s own education. Managing Director Michael Knüppel is convinced: “The problem is simply that the students fall into a debt trap with these interest rates.” The student unions are therefore calling for the interest rates to be permanently reduced and capped.

AStA: People who are disadvantaged are exposed to risk

Felix Schenke from the AStA of the University of Hanover sees the situation as a sign of failure for education policy. It’s about single parents, people who don’t get BAföG or whose BAföG is just not enough. “And we’re talking about people who are already disadvantaged and are then also exposed to the risk of indebtedness,” says Schenke. He is convinced that loans from state development banks should bear zero percent interest.

Promotional bank must take risk into account

The problem: The interest rate of the KfW development bank is variable. It can rise or fall every six months – but for the last few years it has only risen. For the students, this means little planning security. A spokeswoman for KfW told the NDR Lower Saxony on request: “The KfW does not make a profit with the student loan, but has to work to cover its own costs and therefore use the interest rate to reflect the costs.” The bank must also take the risk into account if the sum cannot be repaid.

Last resort drop out

Denise Rabe was lucky: she was able to borrow the money from her parents. And trigger the KfW student loan. There are no longer any surprises about interest rates. “I’ve now created a situation that I can calculate, so I can make precise plans.” But the debts remain – and with them the worries. “The psychological pressure is high,” she says. The student teacher is still thinking about dropping out of her studies. And this despite the fact that her grades are good and the schools urgently need young teachers like her.

Further information

According to a study, prices in Lüneburg have risen by 16 percent and in Oldenburg by 13 percent. Main reason: high energy costs. (03/29/2023) more

For the third year in a row, fewer students were enrolled in 2022 than before. For the first time there are more female students than male students. (04/24/2023) more

In addition, the largest research institution in Hamburg wants to focus on the topics of sustainability and digitization in the future. (08/02/2023) more

This is intended to support young people from non-academic families or with refugee experiences. (07/14/2023) more