BAföG: The consideration of debts and loans when calculating assets
Have you lost track of the Bafög regulations? Attorney Marc-Yaron Popper has once again dealt with a topic that is relevant to you and brings you the most important points:
Debts, like all other liabilities, are deducted from assets in accordance with Section 28 Paragraph 3 BAföG. After that, loan liabilities are generally also taken into account.
However, the liabilities can only be taken into account if they existed when the application was submitted and can be proven. The key date principle applies. In principle, all liabilities must be explicitly stated with evidence in the student loan application so that the student loan office is able to check whether the claims against the trainee actually exist in the stated amount or not.
Liabilities that can be taken into account are loans granted by parents and other debts owed to other relatives or friends. It is important that the implementation and processing of the loan must withstand the so-called arm's length comparison.
The reality check
The loan agreement is subjected to a “reality check” and checked to see whether repayments are made on time and as agreed. The check must therefore show that these are “real” debts that are fulfilled like payment obligations to a third party, especially a bank.
The plausibility is also checked, ie whether the trainee needed the loan and it was actually used. This is usually not the case if, when the loan was granted, there were still own assets in an amount equal to or greater than the loan. In this case, special circumstances are required that must be substantiated in order for the student loan office to recognize the parent or relative loan.
Especially when reviewing loan agreements, which are only communicated subsequently, i.e. after the application has been submitted and usually only a few years after the student loan application, as a result of a data comparison for the purpose of reducing the trainee's total assets, administration and jurisprudence apply a particularly strict standard to arm's length comparisons created.
In order to rule out cases of abuse, the same applies to loans that relatives grant to each other than to loan agreements between strangers.
Forms of the loan agreement
Previously, the written form was considered necessary for the conclusion of a valid loan agreement. The case law has now moved away from this, since in almost all cases that the courts had to decide, the loan agreements were concluded orally, especially with the grandparents or parents of the trainee.
The written form requirement ultimately carried the great risk that fictitious written contracts would subsequently be presented to the student loan offices and the courts and that those involved would be liable to prosecution.
However, the abandonment of the written form does not mean a significant relaxation of the standard of review that is still applied by the courts for the recognition of subsequently communicated loans. Case law sets very strict requirements for the credibility of the oral or, if necessary, written loan agreement. For this purpose, the exact time at which the agreement came into being must always be proven, as well as the execution of the loan repayment, which must be proven by the payments of the agreed installments actually made, ideally by presenting the corresponding bank statements.
What then?
Loan liabilities are only deducted from assets if the loan installments have to be repaid during training. Furthermore, the debts to be taken into account include all claims that have already been specified in terms of existence, scope and due date and which the trainee must seriously expect to be asserted.
The same applies to loans granted by parents to finance education and the associated costs, i.e. practically to fulfill the legal maintenance obligation. However, the trainee's claim to maintenance from his parents cannot be met through a loan.
ABOUT THE AUTHOR:
Marc-Yaron Popper, LL.M. Eur.
The author is a lawyer in Karlsruhe and has a master's degree in European law. He primarily advises on training funding law and is the author of numerous publications on BAföG. Marc-Yaron runs a blog about BAföG.
