U.K. student loans and grants for living costs are set to increase by 2.8%.
Yet, by the Department for Education’s (DfE’s) own admission, a 13.7% increase would be needed to keep pace with the increased cost of living.
As the DfE summarized in an Equality Impact Assessment published this month, the proposed rise “will overall have a negative impact for students.” It added that “a 2.8% increase in maximum support for 2023/24 will not restore the erosion in purchasing power since 2020/21 and is unlikely to prevent a further erosion in purchasing power by the start of the 2023/24 academic year.”
The rise in student loan payments will affect what are called maintenance loans, which the government pays to students while loans that cover tuition fees are paid directly to universities.
Under normal circumstances, the value of maintenance loans increases slightly each year in line with inflation. However, the Institute for Fiscal Studies (IFS) noted that due to the way the awarding body is forecasting inflation, the next academic year is set to be the third in a row during which loan values have decreased in real terms.
Even as the broader consumer price index (CPI) appears to have passed its peak, U.K. inflation remains near a 40-year high after the Bank of England (BoE) increased interest rates from 3.5% to 4% earlier this month.
This has contributed to a spike in grocery price inflation in the U.K., which according to consumer research company Kantar, hit a record high of 16.7% in January, the equivalent of an extra 788 pounds (about $950) on the average household’s annual shopping bill.
For students in the country, the IFS estimates indicate that those from the poorest families starting university in September will be around 1,500 pounds (about $1,800) worse off based on the current inflation forecasts.
In a November survey of students by the Office for National Statistics (ONS), 91% of respondents said they were either somewhat or very worried about the rising cost of living.
And 77% reported being concerned that rising costs might affect how well they do in their studies. Another, 29% admitted to missing non-mandatory lectures or tutorials to save on costs, while 31% said they were not attending additional course-related events that cost money.
Facing a squeeze on their budgets, students have increasingly turned to other sources of finance. On top of the 27% of students who said they had picked up extra hours of paid work to help with the increased cost of living, 25% reported taking on additional debt.
And it isn’t just students that are borrowing more. As PYMNTS reported in December, overdraft usage has surged in the U.K., increasing by 7.1% since August 2021.
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