KfW Student Loan Repayment: How to Pay Back Your Loan

Reading time: 9 minutes

You financed your studies with the KfW student loan and now you're wondering how KfW repayment actually works? The good news: after you finish your studies, you get some breathing room first. The bad news: without a plan, repayment can end up costing more than it needs to. This article walks you through what's coming, phase by phase.

KfW repayment follows a clear three-phase model: the payout phase during your studies, the grace period afterward and finally the repayment phase. The current effective annual interest rate on the KfW student loan is 4.62 percent (as of March 2024), which is variable and can change twice a year.

Phase 1: Payout phase – interest is already accruing

While you study and receive your monthly payout of between 100 and 650 euros, interest is already building up. Many people underestimate this: the interest is not deferred, it is added to your loan balance right away. With total payouts of 30,000 euros over five years, about 3,200 euros in interest accumulates during your studies alone.

A concrete example: you receive 450 euros a month for 54 months. That adds up to 24,300 euros in payouts. At the current interest rate of 4.62 percent, your debt grows to about 27,800 euros – that is 3,500 euros more than you actually received.

Phase 2: KfW grace period – 18 to 23 months of breathing room

After your last payout, the grace period of the KfW student loan starts automatically. It lasts between 18 and 23 months, depending on how your semester end dates line up. During this time you don't have to make any repayments yet – but be careful: interest keeps running.

During the grace period you have three options. First: you pay only the interest that falls due, so your debt doesn't keep growing. Second: you pay nothing and let the interest capitalize – meaning it gets added to the principal. Third: you start making voluntary repayments if you already have an income.

A concrete calculation: with 27,800 euros of debt, another roughly 2,400 euros in interest accrues over the 23-month grace period. If you don't pay it, you start the repayment phase with a total debt of about 30,200 euros. If you pay the interest monthly (around 105 euros), your debt stays at 27,800 euros.

Phase 3: Repayment phase – paying back over a maximum of 25 years

The repayment phase begins no later than 23 months after your last payout. About three months beforehand, KfW sends you a detailed repayment schedule. It shows the installment amount, which depends on your total debt. The minimum monthly installment is 20 euros, and the maximum is 10,000 euros.

The standard installment is calculated so that you're debt-free within 10 years. With 30,000 euros of debt, it comes to about 310 euros a month. You do have the right to adjust the installment up or down in set steps – anything between 20 and 10,000 euros is possible.

One important point: the repayment phase can last a maximum of 25 years. So if you start with the minimum installment of 20 euros, it adds up considerably over the term. With 30,000 euros of debt and a 20-euro installment, you would repay over 52,000 euros in total – more than double the original amount.

Calculating your installment: the factors involved

KfW calculates your installment based on your total debt at the start of repayment. The aim is a repayment period of no more than 10 years. The formula takes into account the current interest rate, your remaining debt and the installment amount you choose.

With debt of 20,000 euros, the standard installment is about 205 euros, and with 40,000 euros it is around 415 euros a month. These figures apply at the current interest rate of 4.62 percent. On the official KfW website you'll find a repayment calculator that works out your individual installment in advance: https://www.kfw.de/inlandsfoerderung/Privatpersonen/Studieren-Qualifizieren/KfW-Studienkredit/

Extra repayments on your KfW loan: possible anytime, free of charge

Unlike many consumer loans, KfW allows free extra repayments at any time. So you can pay additional amounts without a prepayment penalty, or pay off the entire loan in one go. That's a huge advantage you should take advantage of.

In practice it works like this: you transfer the amount you want to your KfW loan account with the payment reference "Sondertilgung" (extra repayment). The minimum is 100 euros. The extra payment is deducted from your remaining debt immediately and so significantly reduces your future interest.

An example shows the difference: with 30,000 euros of remaining debt and standard repayment over 10 years, you pay about 8,200 euros in interest. If you make an extra payment of 5,000 euros after two years, your total interest drops to about 6,500 euros – so you save 1,700 euros.

When does an extra payment pay off most?

The earlier you make extra payments, the more you save. It brings the most to start repaying during the grace period or in the first years of repayment. Paying off faster also makes sense when interest rates are rising, since you're exposed to interest rate risk for a shorter time.

Interest rate trends and adjustments: the variable risk

The KfW student loan has a variable interest rate that can change twice a year, on April 1 and October 1. The adjustment is based on the 6-month EURIBOR plus a markup, currently 1 percent. In recent years the rate has risen sharply – from 0.05 percent in 2021 to 4.62 percent in 2024.

Concretely, that means your monthly installment can change. KfW informs you of adjustments in good time. With 30,000 euros of debt, a one-percentage-point difference in interest amounts to about 25 euros a month. According to current forecasts from the Deutsche Bundesbank (Germany's central bank), interest rates will stay elevated in the medium term: https://www.bundesbank.de/de/publikationen/berichte/monatsberichte

Repayment problems: the options you have

If you run into financial difficulties, KfW offers solutions. You can have repayment suspended for a maximum of six months – once during the grace period and once during the repayment phase. Interest keeps running during this time.

Alternatively, you can reduce the installment amount if your financial situation requires it. KfW reviews this case by case. Important: contact the bank early, before you fall behind on payments. Missed payments lead to reminder fees and can damage your credit standing.

Another option is to combine repayment with other sources of funding. If you receive scholarships for students, for example, you can use them specifically for extra repayments. Money saved through student discounts can also be put to good use to pay off debt faster.

Strategies for optimal KfW repayment

The best strategy depends on your personal situation. Here are three proven approaches:

• Fast-payer strategy: Pay the highest possible installment from the start and use every pay raise for extra repayments. With 30,000 euros of debt, halving the term to 5 years saves you about 5,000 euros in interest.
• Balanced strategy: Choose a medium installment that you can handle comfortably, and build a financial cushion at the same time. Use bonuses such as a Christmas bonus for annual extra repayments of 1,000 to 2,000 euros.
• Flexibility strategy: Start with a lower installment to give yourself room after you start your career, then raise it significantly after your probation period. This makes sense if you work in an industry with a low starting salary at first.

The ideal time to start repaying

You can also start repaying before the grace period ends. That pays off if you're already earning well. Every month of earlier repayment saves interest costs. With 30,000 euros of debt, starting repayment 12 months before the end of the grace period saves about 1,400 euros in interest over the full term.

Tax aspects of KfW repayment

The interest on the KfW student loan is not tax-deductible in Germany, because it counts as a private living expense. Unlike an education loan for a second degree or continuing education, there is no tax benefit here.

The repayment installments themselves are also irrelevant for tax purposes. They are paid out of your net income. So when budgeting, plan with your actual disposable income after all taxes and social security contributions.

Reading and understanding your repayment schedule

Your personal repayment schedule contains all the key information: remaining debt, monthly installment, interest and principal portions, term and expected end of the contract. The repayment schedule is dynamic – it changes when interest rates are adjusted.

Pay particular attention to the principal portion of your installment. At the beginning you mainly pay interest, and the principal portion is small. Over time the ratio flips. With a standard installment of 310 euros and 30,000 euros of debt, about 115 euros go to interest at first, and only 195 euros pay down the debt.

Avoiding common mistakes in KfW repayment

The biggest mistake is letting the grace period go unused. If you're working, pay at least the interest, or better yet, start repaying. The second common mistake: choosing the minimum installment of 20 euros without a concrete plan. That leads to debt that lasts for decades.

The third mistake: ignoring interest rate trends. When rates rise, your installment can increase considerably. Build in a buffer and use periods of good income for extra repayments. If you want to look at other financing options, also take a look at ways to study independently of your parents.

FAQ on KfW repayment

When does repayment begin on the KfW student loan?

The repayment phase begins no later than 23 months after your last payout. About three months beforehand you receive a letter from KfW with all the details on the start of repayment and your monthly installment. The grace period before that is meant to help you get started in your career.

How high are the installments on the KfW student loan?

The monthly installment is between a minimum of 20 euros and a maximum of 10,000 euros. The standard installment is calculated so that you're debt-free in 10 years. With 25,000 euros of debt, that's about 260 euros a month, and with 35,000 euros around 365 euros.

Can I repay the KfW student loan early?

Yes, extra repayments are possible at any time and in any amount from 100 euros. KfW charges no prepayment penalty. You can also repay the entire loan at once, which saves you a considerable amount of interest.

What happens during the grace period with KfW?

During the grace period of 18 to 23 months you don't have to repay yet. However, interest keeps running and is added to your debt each month if you don't pay it. You can pay interest voluntarily or already start repaying.

How do I calculate my monthly KfW installment?

KfW calculates your standard installment from your total debt at the start of repayment. As a rule of thumb, total debt divided by 120 months gives roughly your monthly installment including interest. You'll find the exact amount in the official KfW repayment calculator on the website.

Conclusion: plan your KfW repayment strategically

KfW repayment is plannable once you understand the three phases and actively manage them. Don't treat the grace period as a chance to put things off – pay at least the interest. Choose an installment you can sustain over the long term, but not the minimum installment without good reason. And above all: use every opportunity for extra repayments.

At the current interest rate of 4.62 percent, fast repayment makes economic sense. Every extra euro you pay saves you interest costs. Create a personal repayment plan, run through different scenarios and then make a deliberate decision. Investing an hour or two in planning can save you several thousand euros. Start working on your concrete repayment strategy now.