Before 2005, the Credit Aid’s sole responsibility was to cover a student’s living expenses. As a result, credit was only available to students attending an expensive private university. However, since the assets and income of the parents are counted towards the Credit Aid, many students had problems to cover the costs even approximately. Therefore, at the beginning of 2005 the Federal Constitutional Court decided that there should be more loan models to support students. The first model was launched in autumn 2004 and others followed a little later. The best known student loans are the loans from the Lite Lender and the “Capital Lender” from Agree Bank.
Student loan from the Lite Lender
The Lite Lender’s goal is to increase the number of university graduates and above all to help high school graduates to finance their studies, whose families are not wealthy. Compared to Credit Aid, this loan is very expensive because the amount paid out is a 100% interest-bearing loan. On the other hand, the Credit Aid is 50% an interest-free loan plus 50% government subsidy that does not have to be repaid.
The maximum funding period for the Lite Lender is ten semesters, with the amounts being redefined each semester. The student can decide how much should be paid monthly. The limits are between a minimum of 100 euros and a maximum of 650 euros per month. In addition, it is customary to deduct the interest accrued from the amount requested, so that a precise overview of the repayments is always given. Once the course has been completed, the payment phase is followed by the repayment-free phase (waiting period), which is 23 months. Once the first repayment has been made, the student has 25 years to repay the loan debt. The repayment contributions can be set variably. However, an amount of at least EUR 20 per month must be repaid every month.
Like any loan, a student loan also has advantages and disadvantages. For example, in contrast to Credit Aid, the Lite Lender student loan can be applied for regardless of the parents’ income. It is also possible to combine the loan with existing financing options. These include, for example, Credit Aid or an educational loan. For the application for the Lite Lender loan, it does not matter what type of study location or subject is visited. This financing option is also attractive for EU foreigners between the ages of 18 and 30. Here too, the only requirement is that a full-time degree is completed.
If you receive such a Lite Lender loan, it is possible to repay the amounts paid out at any time in full without incurring additional costs for the borrower. As the payment amount is reset every semester, the interest is also variable. Nevertheless, Lite Lender Bank guarantees an upper interest rate limit that applies for a period of over 15 years. The reference period for the loan ends after the end of the first degree or after the 14th semester, which can be determined when the loan is taken out. On the other hand, it is disadvantageous that proof of performance has to be submitted again and again to ensure that the loan is paid out again. Failure to provide proof of achievement can therefore lead to an immediate end to payments and thus endanger your studies.
“Capital Lender” from Agree Bank
The “Capital Lender” can be applied for by any student at a German university or university who is under 30 years of age. Proof of income of the parents is not required with this form of credit either. However, the applicant must draw up a detailed curriculum that shows which services have already been performed and which still have to be performed. A prerequisite for getting a loan from the German bank is the student’s creditworthiness, which the bank obtains through Credit Bureau.
As with the Lite Lender loan, the student can determine how high the payout should be. In the first two semesters, however, this is a maximum of 200 euros, in the later semesters, however, a monthly amount of up to 800 euros can be paid. The maximum funding period for the loan is linked to the amount paid out and is at least one and a half years and a maximum of five years. When the degree is finished, the payments also end. Then the so-called career entry phase begins and the student has one year before the first installment has to be paid off. The repayment amount is regulated in a new contract. To repay the loan including interest, you usually have 12 years, but you can also choose to repay the entire amount at once.
But the “Capital Lender” also has some advantages and disadvantages. A precautionary measure taken by the bank towards the student is an advantage. The bank has set a total payment limit of EUR 30,000 so that the borrower does not go into debt until the end of his life, for example because his studies had to be canceled. In addition, this loan option is particularly suitable for students who want to study abroad, because then the amount of funding can sometimes be significantly higher than the 800 euros per month set for Germany. If, on the other hand, you are interested in the loan as a non-German, more requirements must be met than by German citizens.
Among other things, it must be demonstrated that the applicant has been in the Federal Republic of Germany for more than two years, has a permanent residence and an unlimited residence permit. Furthermore, experience has shown that it is difficult to finance an entire course of study with this form of credit, which is sometimes due to the payment limit of EUR 200 in the first two semesters. Another risk is that you can easily get into the debt trap with a loan, because it is not possible to always have an overview of the debt because the interest rate varies and is therefore difficult to control.
Other funding options are also possible
Although the Lite Lender loan and the “Capital Lender” are preferred for students, one should not neglect other offers. Another financing option is the so-called graduation loan, which is also the oldest form of student loan. However, this form is aimed at students who are already in the final stages of their studies but are no longer allowed to receive Credit Aid. Thus, the graduation loan has set itself the task of helping these students to cope with the cost of living and the tuition fees. The bearers of this loan are often regional and in some cases limited to individual universities. Most of these offers are also cheaper than other forms of loan because there are no processing fees and interest rates are kept very low. In addition to student loans, there is also an alternative way to finance your studies, such as the student fund.
These are not awarded by banks, but by companies that receive money from investors. This offer is aimed primarily at students who perform well to very well in their studies. The duration and amount of the payout is flexible and varies from company to company. The repayment, however, is made as a percentage of income and must be made directly upon entry into the profession. The advantage of this is that an income is almost certain, since the company that promoted you often offers the students a job after successfully completing their studies.