According to a draft law, the Federal Ministry of Education wants to grant initial aid to needy new students. According to this, the Federal Minister of Education, Bettina Stark-Watzinger (FDP), within the framework of the BAFöG reform, plans a one-off payment of 1,000 euros which, according to the draft, does not have to be returned. The draft provides for increased support for Bafög starting from the winter semester 2024/25: Allowances will be increased by five percent so that students can earn money with a mini-job in addition to funding. It should also be possible to study for one more semester, without having to give up financial support. No justification is necessary. This so-called “semester of flexibility” extends the maximum financing period.
Do these measures solve the problem?
Studying in Germany is really free, but not everyone can afford it. It is not even payments to the university, such as semester fees and administration fees, that play a role, but life outside the university. Housing, heating and food, normal living expenses, are also increasingly expensive for students.
The downside: They don't have a full-time job that can pay for these things. Although part-time jobs are common, they are often not enough. The result: according to the Federal Statistical Office, 37.9 percent of all students are at risk of poverty. The figure is from 2021, but since then the situation has worsened even more. The following points are the most stressful:
1. Rents are unaffordable
All the largest German universities are located in large cities where rents are already significantly higher than the national average, for example in Berlin, Munich, Hamburg, Dortmund, Cologne, Bonn, Nuremberg, Aachen or Hannover. And the costs are rising: The German Economic Institute (IW) examined rents in 38 university cities and concluded that they had increased by an average of 6.2 percent compared to 2022. The previous year it was 5.9 percent. Heating costs increased this year by an average of 43 percent for students.
Cheap apartments for students are scarce. There are 196,000 places throughout the country. This is enough for about ten percent of students. In the eleven largest university cities alone there are 35,000 people on the waiting list. The result: more and more students are staying home. In 2022, about 28 percent lived there. For comparison: in 2018 it was 25 percent, in 2003 it was only 22 percent. Although the coronavirus pandemic also played a role, as many students returned home, there has been no change in trend since it ended.
The problem: The state provides very little help with student loans. The maximum rate paid for rent and additional expenses is 360 euros per month. In 31 out of 68 university cities, according to an analysis by the real estate portal Immowelt, this is not even enough for the basic rent of a small 40 square meter apartment, not to mention warm rent. The federal government has started a program to build more dormitories, but progress is slow. This will probably only create 5,700 places.
2. The Bafög is too low or paid too late
Anna Thewalt, an architecture student from Trier, receives the maximum Bafög fee. But when the 22-year-old's semester began in October, no money arrived. The account was empty, as was the refrigerator, she explains to the Tagesschau. In a non-representative survey conducted by the news channel, about a third of students said they would wait more than five months to finally pay off their student loan after applying.
But when the money arrives, it is often not enough. The maximum amount is currently 452 euros, plus the aforementioned housing subsidy of 360 euros. Anyone who no longer has health insurance through her parents will receive an additional subsidy of 122 euros. So 934 euros is the maximum. That is enough to live in very few cities. A student can earn a maximum of 520 euros per month; if you have more than one mini-job, the Bafög will be reduced.
Fees were last adjusted in 2022. The federal government wanted to significantly improve the situation for students. But since then inflation has long eaten away at profits. The Bafög will not be adjusted again until October 2024 at the earliest. “Average financing rates are far behind inflation,” DGB Vice President Elke Hannack said in the Tagesschau. Also, the app is too complicated. Because of this, many students who are actually eligible do not apply or are rejected. The digitalization of the process will still take time to arrive.
3. KfW student loans have exorbitant interest rates
If parental support, student loans and a mini-job are not enough, you can apply for a student loan at the Kreditanstalt für Wiederaufbau (KfW). The conditions for this are lax: it is enough to have a place of residence in Germany and have German citizenship or be registered here as an EU foreigner for three years. There is also a maximum age of 44 years.
The problem: Since no income or other collateral is required, KfW charges high interest rates. The KfW interest rate corresponds to the Euribor. This is the reference interest rate that banks use for their transactions with each other in the euro area. In turn, it depends on the official interest rate of the ECB. With the increases in the latter, the Euribor also rose and, therefore, the KfW interest rate. The KfW now charges interest of 9.01 percent per year on a loan.
This is not only unsustainable for many new students, but also bad for everyone who already has such a loan, because the interest rates are variable and therefore also increase for existing customers. “I have never advised so many students who have such big problems because of the KfW loan,” says Jens Müller-Sigl, student advisor from Oldenburg, in an interview for Wirtschaftswoche. This is also bitter because the federal government reduced interest rates to 0 percent from 2020 to 2022 to help students. This meant that many people took out a very cheap loan and were now simply saddled with 9 percent interest.
For example, anyone who borrowed the maximum rate of 650 euros for a six-semester degree – a total of 23,400 euros – would now have to repay almost 300 euros per month. It doesn't seem like much, but with a student budget of about 1,000 euros per month it is a lot. According to the federal government, this affects 176,000 students who are currently paying off their loans. The number of new loans requested has been reduced by half this year compared to last year.
The Federal Constitutional Court must now decide
Germany's highest constitutional court will soon decide on the level of Bafög fees. The Federal Administrative Court appealed to the Karlsruhe judges two years ago because it doubted whether both the level of the standard rates and the procedure used to determine who receives how much Bafög complies with the Basic Law. The plaintiff is a student from Hamburg who first went to court against the standard fees in 2014.
The plaintiff's argument is that, according to the Basic Law, the BaföG must also guarantee the minimum subsistence level of students. For that to happen it would have to increase. There are two guidelines: either the maintenance set for children studying according to the Düsseldorf table of 930 euros per month or the fiscal subsistence minimum, which is determined by the basic allowance and increases to 982 euros per month from January. The rates would be 118 and 170 euros above Bafög's current maximum rate. Subsidies for health insurance and nursing care would also be included. A verdict probably won't be expected until next year.
Until then, little will change in the situation of the students. In its draft budget for 2024, the traffic light coalition had significantly reduced student grants before the budget committee approved a further €150 million, which could have financed a small increase. However, at the moment there is no talk of a major reform. The increase could even fall again in the course of the necessary savings discussions.
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