IFS: Cost-of-living crisis to hit students harder than expected

English-domiciled students will be hit even harder by the cost-of-living crisis than previously thought. New analysis based on the most recent inflation forecasts by the Office for Budget Responsibility (OBR) shows that the poorest students will be more than £1000 worse off this academic year than in 2020/21 because government student living cost support in the form of maintenance loans has not kept pace with inflation. This is an extra cut of around £250 compared to previous predictions.

These cuts arise because inflation has recently been much higher than forecast, and maintenance support is adjusted with forecast rather than actual inflation. Unless the government changes the way this is done, another cut is likely next year. Importantly, there is no mechanism in place for these cuts due to forecast errors ever to be corrected.

Kate Ogden, Senior Research Economist said: ‘While others are benefiting from extra government support, students have been left in the cold. Merely because of errors in inflation forecasts, the poorest students will be more than £1000 worse off this academic year than in 2020/21. This could lead to significant hardship for many this winter.’

Ben Waltmann, Senior Research Economist 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.’

ENDS

Notes to Editor 

'Cost-of-living crisis to hit students harder than expected' is an IFS comment by Kate Ogden and Ben Waltmann

It is strictly embargoed to 0001 Wednesday 30th November and can be read under embargo here: https://we.tl/t-IfEUWWiJpB

The comment will be live on the IFS website using this URL tomorrow: https://ifs.org.uk/news/cost-living-crisis-hit-students-harder-expected  

The Institute for Fiscal Studies’ Annual Report on Education Spending is being launched on Monday 12th December at an online and in person event. The report itself will be strictly embargoed to 0001 Monday 12th December.