Students face ‘hardship’ as botched inflation rise leaves them £1,000 worse off

England’s poorest students will lose £1,000 because the government botched inflation forecasts, experts say, plunging them into “significant hardship”.

Ministers are under fire for setting the level of maintenance loans for this academic year when prices were expected to rise by just 2.3 per cent – not the 10.2 per cent now expected.

It means students who rely on the loans to live while studying will be “left in the cold”, even as other groups receive extra financial help, the Institute for Fiscal Studies is warning.

The thinktank also criticises the government for denying help to many families through the “stealth tax” of freezing the parental income threshold for 14 years, at just £25,000.

“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,” said Kate Ogden, a senior research economist.

Her colleague, Ben Waltmann, said: “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.”

The criticism comes amid growing concern that many students cannot afford to keep studying – after 40,000 withdrew from their courses in the year to August.

This was a 23 per cent increase on the previous year and a 30 per cent rise on the numbers pulling out in 2020, when just over 30,500 undergraduates withdrew.

One in three students are left with less than £50 each month after paying rent and bills, while 96 per cent are cutting back on their spending, according to a National Union of Students survey.

The poorest students used to receive maintenance grants, but these were – controversially – scrapped in 2016, as part of George Osborne’s austerity cuts.

The IFS study finds that the poorest students outside London are even worse hit, receiving £1,500 less in living cost loans in 2022-23 than they should, at £11,190.

It warns the underpayment will continue for “many years to come”, without a policy rethink, because “past forecast errors” are not taken into account for any future adjustments.

“Indeed, if the government continues to use out-of-date inflation forecasts for uprating, we expect a small further cut in the real value of entitlements next academic year,” the study says.

The cost of a rethink would be significant – £1bn to avoid cuts for students who started courses in 2022 – but “less expensive for the taxpayer than it may at first appear”.

The IFS report says: “This is because students can be expected to repay a portion of any extra maintenance support over the coming decades.”

On the £25,000 income threshold, it says: “As nominal earnings rise, fewer students currently qualify for the maximum each year, and others become eligible for less support, even though their parents may be no better off.”

The Department for Education declined to say why the value of loans has not been fully uprated, but argued it had “continued to increase the amount students can access” every year.