Housing and living costs – students need help

In 2020, the UK recorded its largest intake of first-year university students only to be hit with an increase the following year. As a result, universities and students alike have been battling with increased demand for housing amidst a cost-of-living crisis. Justin Adesina, IF student volunteer, investigates.

Student housing

Students are facing a renting-affordability crisis. According to the 2021 Unipol and NUS Accommodation Costs Survey, students have been met with skyrocketing rent prices, with the average annual cost reaching £7,374 nationally and £9,488 in London. This illustrates a 61% increase in the cost of student accommodation over 10 years even during years of record-low inflation.

There are two aspects to why this has happened. The first is that student numbers have increased following the COVID-19 pandemic. The second is the failure to provide enough student housing for the increasing numbers of students. As an example, Savills recorded a drop in investment into purpose-built student accommodation in 2021.

Student maintenance loans

It is no secret that maintenance loans are seldom enough to cover rent and living expenses. In fact, less than 10% of private letting agents were able to meet the NUS policy target of 35% of rooms offered at 55% of the maximum student loan. London paints a much bleaker picture – according to the NUS, 88% of the full maintenance loan can be taken up by rent, leaving a mere £38 per week to live on.

To put this into perspective, the Office for National Statistics (ONS) records the average weekly food shop for one person at £35. Even the asylum seekers’ weekly allowance sits at £40.50. £38 or £40.50, it is widely recognised that that amount is simply not enough money for people to live comfortably.

On average, university halls are about 13% cheaper than private renting. However, whilst 28% of universities set their rent collaboratively with the student union, 26% do not consult students at all. Indeed, these figures are irrelevant if rent is still taking up most of the maintenance loan.

Private renting poses more issues than just cost. Students are 60% more likely to have to find a guarantor than if they were to stay in university accommodation, putting the vulnerable, families with lower income/credit, and those without strong domestic family wealth, at a disadvantage.

Moreover, 35% of private landlords will demand an advance rent payment prior to taking occupation in their residences during August/September. For those who already struggle to make ends meet with their maintenance loan, a payment due before they have even moved in, or received their maintenance loan for the coming year, can pose a rather daunting financial burden.

Cost of Living

The rise in the cost of living thanks to sky high inflation and the energy crisis has had a startling effect on today’s students. According to the NUS: 60% have been forced to cut down on their spending;11% of students have found themselves using foodbanks after a sharp increase from 5% in the period of January 2022 to July 2022; and 1 in 3 students are reportedly living on less than £50 a month after rent and bills. The country has left its students struggling, with 31% describing a major impact on their mental health as a result.

This is not just limited to university students. Most apprentices, some of whom are earning as low as £4.81 per hour, cannot cover their living and educational expenses. If you were to think that the government is not doing enough, you would be joined by 92% of students who feel the same way.

It is unfathomable to think that 30 years ago university was free. Now, rather than being funded by government grants, 83% of students are having to seek financial support outside of their student loan to survive. There is also intergenerational unfairness at work when the government can think about increasing the State Pension by 18.5% over two years, yet give students a mere 2.8% increase in maintenance loans – well below the rate of inflation.

It is in the government’s best interests to give students more money. Afterall, the economic output of under-30s is part of the backbone of British society. Students want to be able to spend more money. Graduates want to be able to save to get on the property ladder. These things generate huge amounts of money for the British economy. It is not as if other generations are more productive. According to a combination of three ONS datasets, not only is the 50 and above age bracket approximately 17.63% more likely to be economically inactive compared to those between 16 and 30 years of age, but they spend £19.20 less per week on average.

Student finance – a solution

In 2018 Theresa May commissioned the Augar Review, which examined higher education and funding. It took particular interest in the repayment of student loans and potential changes the government could make to reduce the overall cost to the state of higher education finance.

In critiquing the Augar Review, Sir Peter Lampi of the Sutton Trust regarded the current system as “grossly unfair”. While Lampi argued that “if we are serious about creating an equitable student finance system, fees should be means-tested so that those from low-income families incur the lowest debts”.

Other organisations, such as the Intergenerational Foundation, call for student fees to be scrapped altogether. They argue that higher education is a public good that benefits all of society with the investment made by the State returned via our already existing progressive tax system – one that charges more tax, the more you earn. As it appears that no political party is going to come to the rescue of students by scrapping fees, a means-tested system, would at the very least, help those from low-income families to undertake a degree.

The current student maintenance loan is already means-tested, with poorer students receiving full maintenance loans. However, since 2012, families have been expected to cover the difference between the means-tested maintenance loans offered and actual living costs. The government takes little interest in whether one or more children are going into higher education at the same time, thereby piling pressure on struggling families to help cover their kids’ living costs. During recessions or the current cost-of-living crisis, many families simply cannot help.

Any system in which Britain’s young people must rely on foodbanks does not work. The financial burden is not only a barrier-to-entry but for many a barrier-to-completion. If 75% of students are saying they would not be able to continue funding their studies without further support, the government has a duty to make changes and make them quickly.

The Auger review posits that an extension of the repayment period by 10 years would ensure that more of the student loan is paid off. I would argue that repayment flexibility could be a more mutually beneficial solution.

Repayment flexibility

Alongside a means-tested fee system, the government could reduce the repayment window on student loans to 25 years, coupling this with an optional fixed or capped extended repayment window with a lower repayment rate such that graduates are able to pay back their student loan on their own terms. For instance, if I opt for a longer repayment window with a decrease in annual payment, I’m afforded more freedom over my finances when under pressure personally, at the expense of paying marginally more through interest. This would remain flexible, allowing graduates to tailor their repayment to their individual circumstances on a regular basis.

The benefit of a reduced student loan repayment window is that recent graduates, in retaining more of their income sooner, will spend more and therefore have greater economic output. Regarding the intergenerational fairness of this proposal; the more wealth younger people can generate, the more they will be able to contribute to their pensions. Moreover, carrying this increase in wealth into old age provides greater quality of life for these students in future, taking pressure off of the welfare system for future generations of taxpayers.

Furthermore, to support students whilst they are at university, I propose a reintroduction of government grants for living costs. These grants would be means-tested, acting as an additional maintenance loan that does not need to be repaid. Naturally, for any government to see these grants as worthwhile, the range and quantity of graduate jobs being offered must increase, and that requires investment in business and industry.

It is evident that the current system does not adequately support young people. Tuition fees and maintenance loans create an intergenerational unfairness between those below the age of 55 and those over that age who received their higher educations for free. Though the prospect of scrapping tuition fees entirely does not at present feel realistic, the government must at least consider reform in the interests of its young people.

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