With inflation, student loans are too tight to graduate

(AFP) – “I’ll be between 5,000 and 10,000 euros short by the end”: Faced with rising living costs and tuition fees, the amount many students borrowed at the start of their studies is now proving insufficient. to complete schooling in good circumstances.

Alex knows he’s struggling to finance his studies: the 25-year-old student worked nights at Amazon during his L1 history, which took two years to complete. Then he took a break to work in a factory and save enough to pay for his degree.

When the opportunity presented itself to go to a master’s degree, he decided to borrow 15,000 euros from Crédit Mutuel, thinking that he would be able to finance his modest student lifestyle in Grand Est for two years, or even a little more while looking for a job.

A student loan is specific in that it is not linked to a specific expense, so it is possible to cover the costs of registration or everyday life. With the preferential rate – which, however, varies depending on the banks and the profile of the student – repayment is often deferred at the end of the studies.

“I planned to spend a maximum of 500 euros a month, except that with inflation it’s absolutely impossible,” a scholarship student whose parents can’t help tells AFP. “In 4-5 months, with the price of food, electricity, everything, I got to 600 or even 700 euros a month,” he explains, although he doesn’t spend “thousands and cents”.

Debt aversion

Technically open to all disciplines registered in higher education, this credit “affects less than 10% of students in France, which is relatively few compared to other countries”, Sébastien Grobon, an economist attached to the Pantheon Sorbonne University, explained to AFP.

The contrast is stark with the United States, where more than half are affected, or even with Germany and Sweden. France presents a “greater aversion to student debt”, a specialist on socio-economic inequalities in education clarifies, mainly due to “a tradition of low registration fees and scholarships”.

This is why the student loan “initially referred to more exceptional and expensive training”, “especially private Grandes Écoles” and “business schools”, explains the researcher. These trainings also promise “high salaries to facilitate repayment”.

But recently, “more and more” young people studying in the public sector like Alex are being forced into contracts, says Éléonore Schmitt of L’Union universitaire.

Despite much lower tuition fees, they have to borrow to fund their daily lives, especially since the “explosion of student insecurity” linked to Covid, he explains.

Increase in borrowed amounts

Quantifying student debt in France is very difficult. No sectoral organization interviewed by AFP (FBF, Banque de France, ASF, ACPR) has accurate data on the number and outstanding student loans.

In July 2021, a Senate mission of inquiry expressed regret that no body was responsible for “aggregating this data on a national scale” and spoke of a “poorly understood phenomenon” that “deserves better documentation”.

Banks are very discreet and mainly disclose data on student loans guaranteed by the state, a system that allows people under the age of 28 to borrow up to €20,000 without a deposit or guarantor, as the Public Investment Bank (Bpifrance) plays a role. this role.

Only BPCE was fully transparent with AFP, indicating that it saw “very strong student credit growth” in 2022 at its Banques Populaires and Caisses d’Epargne, with a jump in loans (70,800 + 9.5%). and borrowed amounts (a total of 226 million euros, +21%).

Asked by AFP, BNP Paribas and Société Générale said they saw “a slight decrease in the number of student loans” in 2022. “However, the total amount provided has increased”, reports Société Générale.

The increase in borrowed amounts is not only due to the increase in the cost of daily living. It also explains the increase in the already high registration fees for private schools, a favorite haunt of banks.

+7.5% registration fees

At Sciences Po, where five banks are setting up shop during the integration period, tuition fees – set according to parents’ income (up to €19,670/year) – have increased by 7.5% this year due to inflation.

“Many students took out loans when they started school, which no longer allowed them to cover the amount required by the institution,” condemns Inès Fontenelle, the chosen student.

This is the case of Geoffroy Brocart: the 21-year-old student calculated that €35,000 would allow him to pay the registration fees for the last three years of study (L3 and Master), but this was “of course in terms of 2020, with still very low inflation”.

From now on, “I think I’ll be 5,000 to 10,000 euros short by the end,” partly due to inflation, the master’s student in urban planning suggests, “but maybe more” if the administration makes new increases.

However, Geoffroy Brocart considers himself “very privileged”: “my parents will help me”, “I’m lucky that I don’t have to take out another loan”.

Many students have to apply for an extension, which can take the form of a new student loan or a regular consumer loan, the rates of which are very high.

“Vicious circle”

Although BNP Paribas has not yet seen a “significant increase” in these applications, this year it has opened up the possibility of “taking out another student loan”, she said.

“It’s a bit of a vicious circle: we don’t have enough money anymore and we’ll have to borrow at less favorable rates. Not all students can do it,” warns Geoffroy Brocart.

Interest rates on student loans have risen from less than 1% on average to more than 2% in a year and a half, Maël Bernier, a spokesman for brokers Meilleurtaux, told AFP.

A level certainly much more favorable than the current rates of other credits, but synonymous with repayment, which is still difficult to assume for many young workers starting their professional life.

Especially since not all students are equal when it comes to loan terms: banks generally choose to lend at better rates to students from large schools who are less likely to default.

Those unable to access parental help or another loan will have to tighten their belts by making “variable budget adjustments” to food and care, student union Fage has condemned. Or work in parallel, “over 12 hours/week and at the risk of academic success”.

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