Up to 46,000 students may have used payday loans to make ends meet

David Kingman reports on some worrying evidence which suggests students are facing a cost-of-living crisisgraduation

Many students are facing a cost-of-living crisis and turning to high-interest payday loan companies in order to fund their studies, according to the findings of a new report produced by the National Union of Students and UNITE Students, the student accommodation company.

These figures should further fuel the debate about whether Britain is currently doing enough to support its young people who are attempting to gain degrees.

“Worrying” findings

The research – which was based on surveying a representative sample of some 1,700 students at institutions across the UK – found that 2% had turned to payday loans or doorstep lenders in order to help pay for their time at university. This would amount to around 46,000 students in total if the same result was projected across the entire UK student population.

The survey asked respondents “Which, if any, of the following do you use or will you use to finance your time at university?” and gave them a range of possible answers to choose between, including traditional student loans and maintenance payments, loans from families and friends, scholarships, bursaries, income from work and payday lenders. In total, a quarter of all those who responded to the survey said they had taken on more debt than they expected to before they first went to university.

The authors of the report called for students to be given greater financial education about how to manage bills and household budgets while they are studying. Writing in the Introduction to the report, UNITE Students’ operations director Richard Smith argued that “The uncertainties raised around finances suggest the possibility of a greater need to provide more education to students regarding their financial arrangements.”

A student cost-of-living crisis

This latest piece of research follows hot on the heels of previous evidence that suggest much larger numbers of students are facing a cost-of-living crisis because of government cutbacks.

A separate study published by the National Union of Students last October found that the typical student has a shortfall of around £7,600 per year between the amount they need to spend on necessities and the level of public support which is available to them.

This figure was based on an average student studying outside London who faces costs of £21,440 from tuition fees, rent, books, travel and other living expenses. The typical student would only be eligible for £13,747 worth of loans and grants, including their tuition fee loan, leaving them with a shortfall of £7,693.

Students who study in London typically face higher costs, particularly for rent and transport, but these are offset to an extent by the higher maintenance loans to which they are entitled.

Of course, part of the reason why students now face higher costs is the increase in tuition fees, which can now cost up to £9,000 per year at universities in England. However, although this means today’s students are being charged more than any previous generation to attend university, there is some consolation in that the fees don’t have to be repaid until after they have graduated and are earning over £21,000 per year. In effect, at least no-one should have to starve while they are actually studying.

Two separate trends lie at the heart of the cost-of-living crisis facing students while they are actually studying. Firstly, maintenance loans were frozen in value during the 2013/14 academic year and will increase by a maximum of only 1% during 2014/15. Maintenance grants (based on means testing, and which the student doesn’t have to repay) did rise by 3.2% during 2013/14, but they will rise by only 1% next year and will be frozen the year after that. This means the payments won’t keep up with inflation, hitting the pockets of students who are relying on the student maintenance system to pay their bills.

Secondly, many students have also been hit by rising rents as the student accommodation sector has undergone a wave of new investment over recent years. A report featured in The Economistearlier this year estimated that total private sector investment in student accommodation has risen from £350 million in 2009 to £2.1 billion in 2013, defying the downturn that hit the rest of the property market during the recession. Rents in traditional university-owned student halls also doubled between 2001/02 and 2011/12, according to figures from the National Union of Students.

These figures should be a cause for concern if, as a nation, we want the brightest and the best to be able to flourish at university, without being choked by financial pressures.