Finally the graduation in the bag – and how next? Every year, hundreds of thousands of high school graduates decide to study. With the bachelor or master, the prospect of a good job and the chance for a high starting salary finally beckons. Until that happens, 1.8 million students and just under 980,000 students at colleges and universities will have to go to school for years. What the statistics of the Federal Statistical Office can only guess at are the challenges that students face. On the one hand, this is about the technical aspects. Every semester exams, exams or certificates have to be taken. And every year there are students who can not cope with the demands.
On the other hand, studying costs money. Students in Germany are fortunate enough to be able to avoid high tuition fees. Nevertheless, rent, telephone or car want to be financed. And students have desires – for example with regard to holidays or a new laptop, which it also needs for writing study papers or the bachelor thesis. How to finance these small and big wishes? When it comes to credit, students bite again and again at banks on granite.
As a student, getting a loan is not that easy. This is mainly due to the rather difficult situation with regard to the credit rating. Source: @ filmfoto – 994859974 / Istockphoto.com
The financial situation: challenge student life
Regular expenses that students have to pay include:
- Rent (dorm or shared flat)
- Auto / Mobility
- Teaching materials (scripts, exercise books, etc.)
- Excursions / Internships
- Food and daily needs.
The daily needs include hygiene and cosmetics as well as the mobile phone tariff. A rough idea of what the study costs, convey numbers that come from the German Studentenwerk. In 2016, a freshman had to budget around 819 euros per month . General statements are of course difficult. But financially, students often move at the limit of what is feasible.
And that’s exactly why university employees without a contract have a hard time getting credit from banks – they simply lack financial resources. Background: For banks, credit rating means that the expenditures (also from existing loans) are still sufficiently high.
But I get BAföG? This argument generally does not appeal to banks. Especially since the promotion is rather narrow for many students. The combination of mostly missing assets and the “insecure” income situation makes it easy for banks to keep their fingers crossed for such an application. Especially as another problem arises here. In Germany, seizure exemptions apply. And students often fall short of these – even if they are still working alongside the BAföG.
The credit rating: The Zünglein on the Libra
As already mentioned, it is the financial conditions that make it difficult for students to successfully apply for a loan. Whether a bank customer is creditworthy depends, among other things, on two factors: the current economic performance and the behavior in the past with respect to payment behavior. Efficient in the sense of a positive decision is, who achieves attachable income as an applicant. On the other hand, the payment history in recent years – documented by the SCHUFA – plays a role. If only positive features are noted, an important hurdle has been overcome. Anyone who has already noticed a negative attitude as a student in the past, will have to say goodbye to the hope for a loan. Negative features are usually another knockout criterion for taking out a loan.
Improve credit rating – the side job
Student applications for a loan often fail due to a lack of income. In principle, it is conceivable in this context to supplement the credit rating with a side job. The question is, however, if the whole thing really works. Background: Anyone who works as a student usually uses 450 Euro jobs. And that already enough money is made to justify a lending, usually seems questionable.
One possible solution: Students work more and earn more. However, there are then benefits for social security and payroll tax. The question arises as to whether such a behavior – just for borrowing – really financially justifies itself. Especially since it is important for banks that it is an open-ended employment relationship. In practice, there are still some tricks to relax the situation financially.
Get more borrowers or guarantors on board
In order for students to be able to borrow from banks despite all adversities, there is another solution. Nobody has claimed that, for example, a busy life partner or a parent may not be brought on board as a second borrower. In practice, this can be pave the way towards bank credit. But beware: Two borrowers always have joint and several liability. Their consequences must be clear in advance. A second option is the guarantee – often taken over by parents or grandparents. If the borrower (ie the student) can no longer pay his installments, the bank will resort to the guarantor.
There are various forms of guarantee in German law, such as:
– simple / ordinary guarantee
– Responsible guarantee
– Global guarantee.
In practice with private customer transactions the self-enforceable guarantee is widespread. The latter poses a certain risk to the guarantor as it involves a plea of guilt.
With another borrower or a guarantor, the probability of a loan for students can be significantly increased. Source: @ stephanhartmann – 480036048 / Istockphoto.com
To offer the bank collateral
In parallel with the guarantee, a borrower can also try to offer collateral. On the one hand, they can be material in nature – for example a car. On the other hand, in practice, intangible assets such as insurance are also a tried and tested means. Savings contracts such as a life insurance or home savings contracts come into question here. From the perspective of the student, the latter have the advantage that a loan can be made here as well. Since the amount of the mortgage lending value always depends on the deposits paid in, the practical applicability has to be assessed differently. Students, whose parents started very early with the Bausparer, enjoy certain advantages here.
Claim family loans
It does not always have to be a bank loan when it comes to student loans. In practice, a family loan can help as well as personal loans. The latter is perhaps better known as P2P credit or private lending. For some years quite a source of funding with practical benefits in use, many students prefer to take the family loan. Grandparents are the first contact here. In this context, attention should be paid to the most watertight possible. And every student should be aware that private money lending could also interest the tax office – either because of interest income or against the background of a tax-relevant donation.
To resort to state-subsidized loans
A final aspect of student loans is state-subsidized loans designed to help budding academics. This is:
– KfW Student Loans
The latter category includes, for example, credit provided by non-profit organizations and religious communities, such as the churches. Such loans are often endowed with special terms that should make it easier for students to repay.
Part of the repayment is provided only after completion of the study. It is important to keep in mind the maximum amount of credit at this point. For example, the KfW Student Loan only provides sums of between € 100 and € 650 per month. This is a great complement to funding, but is usually not enough to cover all costs of study.
These forms of student loans are advantageous if neither security nor income is a prerequisite for a successful application.
Conclusion: Student loans are not impossible
If students want to apply for a loan, many banks reject it. But throwing the shotgun in the towel is the wrong approach. Even if private and commercial banks see the award rather critically, it is not completely impossible. On the contrary, who explores all opportunities and opportunities as a prospective academic, can certainly take a loan. It just depends on being clear about some issues. The allocation with banks is always bound to the credit rating – speak income and collateral. Sponsored loans play in a completely different league. Here students also have opportunities that do not generate additional income. But that these loans are to pay off, should be understood by itself.