Students face £1,500 inflation shortfall in maintenance loans, universities warn

Hard-up students in England, who are struggling to pay their rent and bills as the cost of living soars, will lose out on as much as £1,500 a year if maintenance loans fail to keep up with inflation, university leaders have said.

The warning from the Russell Group of universities came as the government prepared to announce loan increases for 2023-24, amid fears that growing numbers of students will drop out because they cannot afford to stay in higher education.

Maintenance loans are taken out by students, in addition to loans for tuition fees, to cover their living costs while they study, though many take on part-time work alongside their degree to supplement their loans.

The reason for the shortfall, the Russell Group says, is that the Department for Education (DfE) calculates annual increases to maintenance loans using out-of-date projections, which do not take into account sudden increases in inflation from factors such as the pandemic and war in Ukraine.

University leaders say government forecasts have been inaccurate in each year since 2020-21 and with no mechanism in place to correct for inflation, it means a “significant real-terms cut” has been baked into the system.

According to Russell Group calculations, if the DfE increases loans in line with the most recent projection for inflation for the first quarter of 2024 – for example 2.8% – a full-time student living away from home outside London will receive £9,978, which is £1,523 short of the £11,501 the loan would be had it increased by the actual rate of inflation.

Prof Charlie Jeffery, the vice-chancellor of the University of York, said universities have been providing additional support to help students through grants, emergency loans and other financial packages. “Now it is time for the government to step up through Covid-style hardship payments and a meaningful increase to maintenance loans.

“For some students, this is going to mean the difference between going to university or not, between continuing their studies or not. If we don’t see this support from the government, we fear more and more students will have to make significant sacrifices in their studies, compromising their education and impacting on their mental health.”

Sultan Chaudhury, the union development officer at the University of Nottingham students’ union, said financial hardship was not just confined to students from disadvantaged backgrounds.

“Students from middle-income households, with limited access to bursaries or scholarships, have also become increasingly vulnerable as parents are now unable to compensate for the growing gap between maintenance loan value and real living costs. As a result, we have seen an increase in students undertaking additional work alongside their studies.”

The Russell Group is calling on the government to increase maintenance loans so they reflect actual inflation and to make the change in-year to help students who are struggling with the rising cost of living.

University leaders also suggested a review of the parental earnings threshold, which has been frozen at £25,000 since 2008, which means fewer students are entitled to the maximum level of support each year. Many would also like to see the reintroduction of maintenance grants for those in most need.

The Russell Group chief executive, Dr Tim Bradshaw, said: “Students are struggling with the rising cost of living and while our members are doing what they can to help, including investing millions of pounds in hardship support, we are concerned about the impact on students’ wellbeing and their studies.

“It’s particularly frustrating to see those challenges exacerbated by the use of a model that means students are set to be £1,500 worse off next year, especially when it can be so easily fixed and it relates to a loan that is paid back by the student.”

A DfE spokesperson said the government increased the amount students can access through loans and grants for living and other costs every year, and universities could draw from a £261m fund for students facing hardship, which is available this academic year through the Office for Students.