Poorer students over £1,000 worse off this year, warns IFS

<span>Photograph: aberCPC/Alamy</span>
Photograph: aberCPC/Alamy

England’s poorest students will be more than £1,000 worse off this academic year than the last, according to a new analysis that warns of “significant hardship for many this winter”.

According to the Institute for Fiscal Studies (IFS), the reduction – which means students from the poorest families will be £125 out of pocket each month – is due to the falling value of maintenance loans, which students take out to cover their living costs.

Maintenance loans are adjusted in line with inflation forecasts rather than inflation itself. Because inflation has been significantly higher than forecast, students are being hit harder by the cost-of-living crisis than previously thought.

“While others are benefiting from extra government support, students have been left out in the cold,” said IFS senior research economist and author of the report, Kate Ogden. “Merely because of errors in inflation forecasts, the poorest students will be more than £1,000 worse off this academic year than in 2020-21. This could lead to significant hardship for many this winter.”

The report warns that the cuts in support will not only affect students this year, but potentially for years to come. “There is no mechanism in place for these cuts ever to be undone, as past forecast errors are not considered when the adjustment in entitlements for the following year is determined.

“This means that – unless and until policy changes – any cuts will stay in place. Indeed, if the government continues to use out-of-date inflation forecasts for uprating, we expect a small further cut in the real value of entitlements next academic year.”

The IFS’s warning comes after a survey by the Office for National Statistics last week found half of students in England were already struggling with financial difficulties. A quarter were taking on additional debts and three in 10 were skipping lectures and tutorials in order to cut costs.

More than nine in 10 students (91%) said they were worried about the cost of living, 45% said their mental health had deteriorated as a result during the autumn term, and nearly one in five said they had considered pausing their degree until next year.

According to the IFS analysis, the real value of maintenance entitlements is now at its lowest level in seven years. If forecasts had been accurate, students from the poorest families studying outside London and living away from home would be entitled to £11,190 in living cost support – about £1,500 more than they are actually receiving.

A co-author of the IFS report, Ben Waltmann, said: “Using forecast inflation to uprate maintenance loan entitlements makes sense, but having no mechanism to correct errors makes no sense at all.

“The government should ensure maintenance loans are uprated consistently rather than allowing a large and essentially random reduction in the value of loans to become baked in.”

A Department for Education spokesperson said: “We recognise the financial challenges students face with the rise in global inflation. That is why we have continued to increase the amount students can access through loans and grants for living and other costs every year.”

The cost-of-living crisis is also hitting the recruitment and retention of trainee teachers, according to a survey by the National Association of School-Based Teacher Trainers.

Nearly half (47%) of initial teacher training providers who took part in the survey said trainees had already quit this year because of the cost of living, especially rising travel costs, and nearly all (96%) providers were worried that more would follow.

Meanwhile, strike action by 70,000 members of the University and College Union will resume at 150 universities on Wednesday over pay, working conditions and pensions. It follows two days of strike action last week, and the UCU has already warned of further industrial action in the new year, failing an improved offer from employers.

The UCU called for a reversal of pension cuts for members of the Universities Superannuation Scheme (USS), after the latest monitoring report found the scheme was £5.6bn in surplus, up from the £14.1bn deficit cited in the 2020 valuation. The UCU’s general secretary, Jo Grady, said: “The USS pension scheme is going from strength to strength and there remains no credible reason why benefits should not be restored.”

In a separate dispute, sixth-form teachers who are members of the National Education Union are also due to go on strike at 77 colleges across England on Wednesday in pursuit of an above-inflation pay rise.