With inflation, student loans become too tight to finish your studies

Struggling to finance his studies, Alex knows: this 25-year-old student worked nights at Amazon during his first year of his history degree, taking two years to complete it. He then took a break to work in a factory and raise enough money to pay for his studies.

When the opportunity to go for a master’s degree presented itself, he decided to borrow €15,000 from Crédit Mutuel, thinking he could finance his modest student lifestyle in the great East for two years, or even a little more, the time to find work.

The student loan has, in fact, the specificity of not being linked to a particular expense, thus making it possible to pay registration or everyday life costs. With a preferential rate – but which differs depending on the banks and the student’s profile – it is often repaid deferred, at the end of studies.

“I had planned to spend €500 per month maximum, except that with inflation, it is absolutely impossible,” confides the scholarship student, whose parents cannot help. “For five months, with the price of groceries, electricity, everything, I have gone to €600, even €700 per month,” he explains, although he does not spend “thousands and cents”.

France presents a greater aversion to student debt

Technically open to any major enrolled in higher education, “this credit concerns less than 10% of students in France, which is relatively low compared to other countries,” notes Sébastien Grobon, economist attached to Panthéon-Sorbonne University. .

Strong contrast with the United States

The contrast is strong with the United States, where more than half are affected, or even Germany and Sweden. “France has a greater aversion to student debt,” notes this specialist in socio-economic inequalities in education, particularly because of “the tradition of low registration fees and scholarships.” This is why, “the student loan initially concerned exceptional and more expensive training”, in particular large private schools and business schools, he explains. These training courses also promise “high salaries, which will facilitate reimbursement”.

The problem is that more and more students in the public, like Alex, are forced to contract one, says Éléonore Schmitt, from union The Student Union. Despite much lower tuition fees, they have to borrow to finance their daily lives, especially since the “explosion of student precariousness” linked to covid.

“Poorly understood phenomenon”

Quantifying student debt in France is very difficult. No sector organization interviewed by AFP (FBF, Banque de France, ASF, ACPR) has precise data on the number and outstanding student loans. In July 2021, a Senate fact-finding mission also regretted that no structure was responsible for “aggregating this data on a national scale”, speaking of a “poorly understood phenomenon” which “deserves to be better documented “.

Increase in amounts borrowed

The banks are very discreet, mainly communicating the figures for state-guaranteed student loansa system which allows those under 28 to borrow up to €20,000 without deposit or guarantor, since it is the Public investment bank who plays this role.

Only the BPCE group was completely transparent with the AFP, indicating that it had observed, in its Banques Populaires and Caisses d’Epargne, a “very strong dynamism in student credit” in 2022, with a jump in the number of loans (70,800, +9.5%) and amounts borrowed (€226 million, +21%). When questioned, BNP Paribas and Société Générale indicated that they had observed in 2022 “a slight drop in the number of student loans”. However, “the total amount granted has increased”, specifies Société Générale.

The increase in borrowed amounts is not solely due to the increase in the cost of daily living. It is also explained by the increase in already high registration fees for private schools, a favorite hunting ground for banks.

+7.5% registration fees at Sciences Po

At Sciences Po, where five banks are setting up their stand during the integration period, tuition fees – determined according to parents’ income (up to €19,670/year) – have all increased by 7.5% this year , because of inflation. “Many students had taken out loans when they entered the school which no longer made it possible to cover the amount requested by the establishment,” denounces Inès Fontenelle, elected student.

This is the case of Geoffroy Brocart, 21 years old: he had calculated that €35,000 would allow him to pay the registration fees for his last three years of studies (L3 and master), but it was “obviously within the conditions of 2020, with still very little inflation.” From now on, “I think I will be missing between €5,000 and €10,000 to finish”, partly because of inflation, indicates the master’s student in urban planning. “But it might be more if the administration makes further increases.” However, he considers himself “very privileged”: “My parents will help me. I’m lucky not to have to take out another loan.”

Many students must request an extension, which can take the form of a new student loan or a normal consumer loan, the rates of which are very high.

“It’s a bit of a vicious circle”

Although BNP Paribas has not yet noted a “significant increase” in these requests, it has nevertheless opened up the possibility of “taking out an additional student loan”. “It’s a bit of a vicious circle: we no longer have enough money and on top of that, we have to borrow at less advantageous rates. Not all students can handle that,” warns Geoffroy Brocart.

In fact, the interest rates on student loans have increased in a year and a half from less than 1% on average to more than 2%, indicates Maël Bernier, spokesperson for the Meilleurtaux.com brokers. A level certainly much more advantageous than the current rates of other credits, but synonymous with a repayment which remains heavy to assume for many young workers starting their professional life.

Not all equal when it comes to loan conditions

Especially since not all students are equal when it comes to loan conditions: banks generally choose to lend at better rates to students from major schools, who are less likely to default.