Do I have to pay interest on the education loan during my studies in Germany?
It depends on your loan type. KfW Studienkredit, Germany's most popular student loan, charges variable interest that accrues continuously while you study. BAfoG loans are interest-free. International lenders like Prodigy Finance usually start accruing interest immediately, though some offer a moratorium so you skip monthly payments while studying.
Whether you pay interest during your studies in Germany depends entirely on which loan you choose, not on the country's rules as a whole. Your KfW Studienkredit will quietly add interest to your balance every month you are enrolled, while a BAfoG loan charges you nothing extra to borrow.
Interest Rules By Loan Type
| Loan Type | Interest During Studies | Key Detail |
|---|---|---|
| KfW Studienkredit | Yes, accrues continuously | Variable rate; compounds unless you pay it monthly; 6 to 23 month grace period after payouts stop |
| BAfoG (state aid) | No, interest-free | Half is a grant you never repay; the loan half is repaid at 0% interest |
| International lenders (e.g. Prodigy Finance) | Usually yes, from disbursement | Some offer a full moratorium on payments but interest still accumulates |
| Income-share agreements (e.g. Bildungsfonds, Brain Capital) | No traditional interest | You repay a fixed percentage of future income instead, only once you earn above a threshold |
How To Keep Your Loan Costs Down
- If you take a KfW loan, make small voluntary interest payments during your studies so the balance does not compound into a much larger debt
- Check if you qualify for BAfoG before committing to an interest-bearing loan, since it remains the cheapest option where eligible
- Compare the full moratorium terms of any international lender carefully, since a payment-free period is not the same as an interest-free one
My Advice
Before signing anything, ask your lender directly whether interest compounds monthly or annually during your studies, and request a full repayment schedule showing the total amount you will owe at graduation. If you can afford even small interest-only payments each semester on a KfW loan, make them, because that single habit can save you thousands of euros by the time you finish repaying.
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