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Students battle to stay afloat in cost of living crisis

When Kian Banks starts the second year of his history and politics degree next month, his first priority is to knuckle down and study. The first person in his family to go to university, and with ambitions to become a teacher, he has high hopes for his degree. Only one thing is getting in the way: money.

With no financial support from his parents, uncertain hopes of a job and no additional help from his university in north-west England, he is budgeting to live off a government maintenance loan of £9,706 next year. As the costs of energy, rent and food escalate, he knows it falls short of what he needs to survive.

“I’m scared,” Banks says from his parents’ house in Wolverhampton. “I fear if I have to work again week on week like last year I won’t be in a position to leave university and say I’ve done the best I can.”

Stretched finances have long been a feature of undergraduate life. But as UK inflation tops 10 per cent, energy prices nearly double and recession looms, students’ money woes will go far beyond budget baked beans and discounted club nights.

As the UK’s largest and most economically diverse student population gets ready to start university, experts are warning of an impending crisis: rising student poverty, a narrower university experience and a widening divide between rich and poor that will reverberate throughout the adult lives of those studying today.

“A lot of students are getting sucked into the situation where they can’t afford to keep themselves afloat,” says Jake Butler, operations director at student money website Save the Student. “I’ve never been more worried.”

As the new wave of freshers confront hard financial decisions already faced by their fellow students, there are signs many are being forced to make unorthodox choices to maintain their studies.

Busting the budget

According to research from the National Union of Students (NUS) in July, one in three students is left with less than £50 a month after paying rent and bills, and 96 per cent were cutting back on their spending as a result of the cost of living crisis.

Students are more likely than other groups to be on low incomes, in short-term rented housing, and juggling part-time work with often time-consuming and sometimes costly studies, experts say. More than one-fifth are international students. And most are learning about managing their finances for the first time.

That means the cost of basics such as energy and food — which have risen disproportionately — are likely to take up a greater share of students’ weekly budget. A significant number of students were struggling to afford basics even before the summer. In the NUS survey, 11 per cent were using food banks, up from 5 per cent in January. One-third used credit cards to get by.

Chloe Field, vice-president of the NUS, said rises in these costs, alongside accommodation bills, are pushing people away from pursuing higher education. “Without intervention, we fear that no amount of budgeting and saving is going to stop students from falling into poverty this autumn.”

So far, help has been slow to arrive. After giving students limited additional emergency support during the Covid pandemic, the government has so far offered no extra cash to help with the cost of living, although it asked the Office for Students to “protect” £256m already available for disadvantaged students this financial year.

Students do not pay council tax, so will not benefit from a £150 rebate announced by the government in April. They are unlikely to qualify for additional relief reserved for those on means-tested benefits.

© Nathalie Lees

In halls and some privately rented housing, many students are on bills-inclusive contracts which are locked in for the year. They should be protected from rising energy costs, says Vivi Friedgut, founder of student financial advice company Blackbullion.

But she also warns that landlords could try to increase bill payments illegally — despite the fact that it will typically be landlords, not student tenants, who will receive the government’s £400 relief for energy costs.

“I would urge students to get in touch with their landlord and ask the question — are you passing this on to me, am I getting a rebate?” Friedgut says, adding they should carefully review their contracts and ask whether landlords are standing by the terms.

Study vs work

A lack of emergency help is not the only problem. The maintenance loan that is the main form of government support for students from lower-income families has been lower than annual living costs for some time.

This year, the shortfall widened when the government increased the loan value by 2.3 per cent, far below inflation. Those studying outside London qualify for up to £9,706 a year depending on parental income; in the capital, the maximum loan is £12,667. The government said students “now have access to the largest ever amounts in cash terms”.

Caleb Percival, who graduated in creative computing from the University of Bath last year, had no choice but to work between 12 and 20 hours a week while studying. This year, he says, things will be even tougher.

“The student loan doesn’t cover the cost of living,” he says. “Basically, everyone has to have some way of earning money to get through university.”

Five tips for keeping student finances under control

Choose your bank wisely. Not all student accounts are created equal, and this year more are offering free discount cards, ebook subscriptions or cash incentives of up to £100. Student bank accounts also offer interest-free overdrafts of up to £3,000 across three years, which could come in handy for paying deposits or emergency spending.

Use energy where it’s free. Most student halls will offer all-inclusive bills, but if you’re being charged separately, then using university facilities such as charging points at the library or showers at the gym could cut your monthly costs. Some universities are investing in larger communal areas to ensure access to warm spaces.

Manage your maintenance loan. Maintenance loans are paid in three instalments throughout the year. Each will have to last several months: try transferring it to a separate account and earmarking for priorities like rent or bills.

Beware of credit and “buy now pay later”. Credit cards may look like an easy way to extend your budget, but if you don’t pay back your bills you may be shocked at the mounting interest. And while buy-now-pay-later products may look less risky, it could be tempting to use them to buy what you can’t afford, and still end up in debt.

Make the most of student discount offers. Discount cards like Totum can get you money off your weekly shop as well as pricier products, while railcards will cut one-third of travel costs including on London Underground.

According to Save the Student statistics, two-thirds of students had a part-time job last year. They are also looking to do more work: website Student Beans this spring found 42 per cent of 16 to 24-year-olds had taken on an additional job and 61 per cent a “side hustle” in response to rising costs, such as selling craft items or doing online work.

A dependence on part-time jobs means some students are vulnerable if companies cut staff. “Rich students go dancing and the poor students serve them VKs [fruit-flavoured vodka drinks] at two in the morning,” says Jim Dickinson, an editor at higher education blog Wonkhe. “If the rich students are going out [only] two nights a week there’s less work for the poor students.”

Taking on more hours can also be damaging. In a crucial revision period ahead of his summer exams last year, Banks was working 35 hours a week, which he believes affected his academic performance. He hopes to avoid the same situation next year.

“I’m confident I’ll be able to finish my degree,” he says. “I only worry about my mental health side of things. It stressed me out a lot last year.”

Although some part-time work can correlate to a better performance in a degree, studies suggest students who take on 11 hours or more a week do less well.

Minimum-wage jobs also give students less time to beef up their CV with experience valued by graduate employers, widening the gap between rich and poor as they compete for the most lucrative jobs.

“The people who come out of university having built networks and connections, who are doing volunteering in their spare time, are the people with money,” Dickinson says.

Adapting to tough times

Some are asking if universities can do more to help provide work opportunities that ease the financial pressure on students.

At the University of York, the student union is working with local companies to offer flexible roles targeted at students. It also employs them directly: 70 per cent of the union workforce, or about 160-200 people, are students at the university.

“It means that students are able to get jobs that are flexible around their degrees,” says Hannah Nimmo, NUS community and wellbeing officer.

Universities know they have to find other ways to support students too. “We will be seeing more students in the coming year thinking hard about how they pay their rent and how they pay for all the ancillary things for studying, like computer hardware, WiFi, connections and so on,” says University of York vice-chancellor Charlie Jeffery. “We’re going to have to do more.” 

At the University of Hertfordshire, head of student experience Mairi Watson is “concerned for our students’ wellbeing” and says the university is reviewing the help it offers them. In addition to running wellbeing support hotlines and a community fridge, where students, staff and local businesses share unwanted food, the university is assessing the availability of hardship funds and emergency loans.

But the economic squeeze constrains the amount of help universities can offer. Frozen at £9,250 since 2016, the tuition fee that constitutes the per-student income for most universities has already been cut to two-thirds of its original value by inflation and is likely to fall further as costs rise.

“It’s going to change all our lives and universities themselves,” Jane Harrington, vice-chancellor of the University of Greenwich in south-east London, says. “We’re going to find ourselves with less money.”

Vice-chancellors say part of the solution is to lobby the government for more support. But with little promised by Liz Truss or Rishi Sunak, the Conservative leadership contenders, it looks more likely that it could be up to students to change. They are already altering their lifestyles to adapt to tough financial times, which is changing the typical student experience in sometimes unexpected ways.

In a July survey by Student Beans one-third of respondents said they never drink alcohol, up from 27 per cent in September the previous year. While a range of factors, including changing demographics of students and wellness trends, could be behind the increase, Student Beans’ chief strategy officer William Harris said a more frugal approach was part of the puzzle.

“We believe the cost of living crisis is encouraging people to cut back on their drinking, swapping costly pints for cheaper soft drink options,” he said.

In the same survey, more than a quarter said they had questioned whether they could afford to go to university at all.

At Connell College in Manchester, 18-year-old students were excited about their next steps when they picked up their results for A-levels and BTecs last week. But their excitement was tempered by low-level anxiety over how much it would cost.

Headshot of Kristian Ley
Kristian Ley: ‘I don’t want to put my family in extreme poverty’

Kristian Ley, who will study biomedical science at Manchester Metropolitan University, says he opted to stay at home rather than live in halls to save money. “I don’t want to put my family in extreme poverty.”

Emma Soper, the head of admissions at the college, says there is a sense students are “starting to pick courses that are a little bit career oriented” and are focused on clearer pathways to work than previous cohorts.

For Eloise Parry the crisis has led her to abandon plans for a psychology degree in favour of a degree apprenticeship with Thames Water, where she will gain project management experience while earning a salary.

“It was the time when everything about energy prices started to come out . . . it just clicked in my head that I was just doing this degree for the sake of it,” she said. Instead she hopes to save to buy a flat while living with her parents.

“I don’t want to be renting the rest of my life,” she says. “I realised if I went to university I’d graduate with no savings . . . I need to get a head start.”

Our rent rose by £460 a month in just four days

Headshot of Yoohyun Son
Yoohyun Son: student accommodation is often gone 30 minutes after being advertised © Charlie Bibby/FT

I knew it would be difficult as a student to find a flat to rent in St Andrews, the Scottish university town. But I had no idea how hard — and expensive — it would prove, writes Yoohyun Son.

After living in university halls for my first year, I had heard some of the horror stories, but I was keen on the extra freedom and flexibility of a private flat. And I hoped to save money on the £10,000 a year charged in halls.

So, together with a friend, we started looking. We quickly found that you had to move fast — properties pop up, but in less than 30 minutes they are taken down as so many would-be tenants have already phoned or emailed asking for a look.

Eventually, my friend and I came across a two-bedroom flat for £1,340 a month, an average price locally — £670 each. We didn’t have time to visit the property — we looked at the photos online and emailed to say we would take it.

The landlady was friendly and promised to send over a contract the following day, but did not. After a day or two of delay, she emailed to say other students were willing to pay £1,400 a month.

The original rent price had already been over our budget, but we were desperate to bag a place in our university town, so we agreed to match the price.

She promised the contract the next day, but it did not arrive. On the day we had set as the start date for our lease, she stated that the rent was now £1,800 — or £460 more than she had quoted only four days earlier. In desperation, we agreed.

My friend and I are hardly alone. Across the UK, full-time student numbers have been rising rapidly — from 1.7mn in 2010 to 2.1mn in 2020-21. The supply of student accommodation has also increased but the effects have been offset by a sharp jump in overall national demand for rented accommodation.

In St Andrews the problems are particularly severe, as the full-time student population — up from 8,170 to 10,435 in a decade — is disproportionately large: the total estimated population now (students included) is around 18,400. This year, the Open Golf Championship brought in thousands of visitors scrambling for accommodation and paying up to £1,000 a night.

In August, the university finally offered accommodation in Dundee, a city an hour’s commute away. Yes, it’s housing but it’s hardly going to allow students to live a normal student life. Universities need to work much harder at helping students find what they want — and invest in building more accommodation.

Yoohyun Son is an intern working at the Financial Times

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