Dr. Dieter Dohmen Thessaloniki, October 4, 2010 Loans for VET in Germany

Content 1.Loans – the frame 2.VET-Loans – Regulations 3.VET-Loans – Data 4.VET-Loans – Efficiency & Effectiveness

The environment Two loan schemes: Federal Law on Student Support and Federal Law on Support for VET-upgrading programmes (e.g. Master-craftsmen programmes and comparable qualifications) Full-time school-based (initial) VET – 100% grants Full-time studying at universities – 50% grant, 50% loan -> CVET-programmes are covered, if Master programmes are considered CVET (=> if at all, this law is of minor relevance in this context)

Regulations Federal Law on Student Support (BAfoeG): Full-time studying at universities – 50% grant, 50% loan Full-time school-based (initial) VET – 100% grants -> CVET-programmes are covered only, if Master programmes are CVET (age restriction: 30 years at the start of the programme) => if at all, this law is of minor relevance in this context

Regulations Federal Law on Support for VET-upgrading programmes (AFBG): i.e. Master-craftsmen programmes and comparable qualifications Full- or part-time programmes Programme and examination fees (of up to € ) Costs for preparation of “master-piece” Costs of maintenance (in case of full-time programmes) (means-tested)

Regulations Federal Law on Support for VET-upgrading programmes Maximum support for full-time programmes: Maintenance: up to € 675 up to € 155: loan (based on income assessment) rest: 56% loan/44% grant Plus € 215 for husband/wife (if applicable)50% loan/50% grant Plus € 210 per child (if applicable)50% loan/50% grant (plus € 113 per child for lone parents (if applicable): 100% grant) Loans are interest-bearing: Euribor + 1% (+0.7% risk contribution)

Regulations Federal Law on Support for VET-upgrading programmes Maximum duration: full-time - 2 years, part-time - 4 years Maximum loan (depending on personal situation): e.g. € 16,200 (un-married) or € 21,300 (married, 1 child) Grace period: time of studying plus 2 years afterwards (can be extended to 6 years) Repayment period: max. 10 years Repayment rate: min. € 128 per month, but can be adjusted to the maximum repayment period (e.g. in examples € 135 and € 177)

Special regulations Loan can be reduced … by 25% upon successful examination by up to 66% in case of foundation of a company, if one employee or trainee is deployed in case of part-time employment due child-rearing and insufficient income repayment can be postponed (and can be granted eventually)

Some data Number of trainees supported: 157,500 (2009) 136,000 (2006) Average amount: € (for all programmes) (2006: € 2,715) for public institutions: € 3,837 (25% of participants) for private institutions: € 3,547 (9%) for courses at public institutions: € 2,802 (34%) for courses at public institutions: € 2,317 (25%) Distance education courses: € 1,433 (8%) Average support (per Person and month): € 745 Average share of loan: 69% (2009) (2006: 71%)

Some data Average support (per Person and month): Grant for maintenance: € 195 (26%) Grant for child care: € 115 (15%) Loan: € 433 (59%) Total: € 745 Average share of loan: 69% (2009) (2006: 71%)

Some data Number of trainees supported: 157,500 (2009) 136,000 (2006) female share: 31% (2009) (2006: 32%) full-time: 26% - part-time: 34% (2006: 26 and 36%) 83% have no income, 12% less than € 5,000 (no gender differences)

Some data

Efficiency & effectiveness No official data on administration cost is available however administration cost of interest rate is 1%point (in comparison: for BAfoeG costs of loan administration are at 2.7%) Default rates are not known: however, the 0.7 %points increase of the interest rate suggest that they are not too high

Measures to improve efficiency & effectiveness Regulations in Germany are based on legal approaches, i.e. efficiency and effectiveness are of minor importance. However, few changes have been made, e.g. Loan was transferred from public budget to KfW, … … and introduction of interest-bearing loans (from interest-free) (though interest during training and 2 year grace period is paid by government) Support for children and partner turned to a 50% loan (from 100%) 25% reduction for successful examination has been introduced last year

The Future KfW Future Education Loan?