Germany Changes Student Financial Aid

Berlin -- The Federal Republic of Germany is making a change in the way it pays for need-based student financial aid. In the past, the cost of the main aid program, the Bundesausbildungs-förderungsgesetz (more commonly known by its nickname Bafög), was shared by the national government and the individual states. From 2015 onward, the national government will pick up the entire cost. The rationale behind the change is to relieve states of the burden so they can increase funding directly for universities and schools.

Perhaps this is a good change, perhaps not. Four decades ago, the USA went down the same path by choosing 100% federally funded student aid programs over those that required state and institutional matching funds, only to see states redirect monies elsewhere and raise tuition. Germany is different and may not see such a result: the national legislature's upper house is made up of the governors of the states, so there is closer coordination between levels of government. And there is no tuition at public universities. Germany experimented with tuition charges for several years but has since done away with them.

The Bafög will also be increased by seven percent for the coming year; the income and asset allowances will be raised the same amount. The program will be opened to more non-Germans as well. German universities are already tuition-free to qualified students from other countries, including the United States. The Bafög aid is to help financially needy students with living and other expenses while attending a university.

Another difference between Germany and the USA is how the Bafög is structured. It is half-grant, half no-interest loan. Repayment of the loan portion starts when income exceeds a certain level. This is something the U.S. Congress should look at to reform its own Stafford Loan and Pell Grant programs.