Maintenance loan increase ‘to leave students £1,900 worse off’

English university students will be nearly £2,000 worse off next academic year if maintenance loans rise only by the projected rate of inflation, the Russell Group has warned.

New rates for what undergraduates can borrow to cover their living costs are expected to be announced by the government in the coming weeks, but the group of research-intensive universities said any rise was unlikely to offset the below-inflation increases seen in recent years.

The loans are set using inflation forecasts – rather than the actual current rate of inflation – and last year’s increase was worth 2.8 per cent, which is what the government’s Office for Budget Responsibility (OBR) was predicting inflation would be in the first quarter of 2024.

In fact, inflation – as measured by the retail price index excluding mortgages (RPIx) used by the government to set the loans – stands at 4.1 per cent, and there is no mechanism in place to correct the loan amount if forecasts turn out to be wrong.

For the first quarter of 2025, the OBR projects inflation to be 2.5 per cent, which – if loans are increased by this amount – would mean a full-time student living away from home outside London would receive £10,244 per year.

The Russell Group said this would leave the student £1,906 worse off had the government raised the loan by the actual rate of inflation since 2020-21, which would have taken it to £12,130.

It said the shortfall was “compounded by the freeze on the parental earnings threshold used to calculate maintenance loans in England”.

Students are eligible for the maximum loan only if their household income is less than £25,000 a year, a figure that has been frozen in cash terms since 2008. If this had increased with earnings, it should now be set at about £35,000.

The Russell Group said its universities were continuing to fund measures to help students with the cost of living, given the shortfalls in their loan funding.

Initiatives ranged from increasing the amount paid into hardship funds to offering free and low-cost meals, subsidising travel and employing students in part-time jobs. The total cost of the support provided by universities amounted to tens of millions of pounds each year, the group said.

Joanna Burton, the head of policy (higher education) at the Russell Group, said students were a “significant but often overlooked casualty of rising cost-of-living pressures”.

Universities were doing what they could, but “we can’t do this on our own”, she added and called on the government to offer wider support “so students have enough money to live on”.

“We continue to urge the government to uplift maintenance loans to reflect real annual inflation, as well as the reintroduction of maintenance grants that were previously a lifeline for the most disadvantaged students,” Ms Burton said.

“During the pandemic, our sector worked successfully in partnership with the government to maintain student safety and continue quality education. We can learn lessons from this and once again work together to ensure students are supported to thrive in their studies, without worrying about whether they can afford essentials.”

tom.williams@timeshighereducation.com