Applying for a long-stay visa after having a Schengen visa refused

Formally, it's not a problem. But even if the rules are not exactly the same, the reasons that led to the rejection of your previous application presumably still apply. You need to weigh that carefully and we certainly can't tell you if it's going to work or not.

Originally I applied for a Schengen visa short stay but my application was refused and now I'm planning to re-apply for a longer visa (6 months) for the same purpose, to study german language.

You did not say why it was rejected (the specific reasons are mentioned in the response), but as a guess I would say that should not have applied for a short stay as your purpose was for education.

So to start off with, make sure you are applying for the right purpose and providing the correct documents.

Also a Schengen visa is limited to 90 days of maximum stay; if you want to stay for longer than that period (as is normally the case for students) you would need to apply for a residence permit which is usually a stamp on your passport once you have entered the country. In this case, you might need to provide additional supporting documents to the embassy.

Above all else - be truthful in your application and ask the counselor at the Embassy what else you need to provide to clarify the purpose of your visit.

Keep in mind they are looking for signs that you are not using this visa as a pretense to migrate, work illegally or seek asylum in the country - and that there are significant ties to bring your back to your home country/domicile.

It was the agency I paid who advised me of the short stay visa, they registered me to a 6 months language course and I paid 3 months tuition fee and my agent told me to apply for a short stay visa.

I don't know why they advised you for a short stay (unless you were planning on coming back between your course).

From my experience, what you need for education:

1. Letter confirming admission from the institution.
2. Sufficient insurance for the duration of your stay.
3. Proof of funds (or other means, for example, scholarship letter) that attest your ability to support yourself during your stay.
4. They might also ask for proof of accommodation, although sometimes this is not required.

And now my agent was kind of telling me to apply for a long stay and then open a blocked account in a german bank.

The blocking of funds is part of the financial proof required (although it seems a bit odd to have funds blocked in the German bank). This could be a condition of your language course though.

You can ask the agent what was the reason for the rejection as this will help you in your subsequent application.