Student loans – looking beyond tuition fees

JT photo

by Policy & Research Officer, Jamie Thunder 

Last week’s A-level results saw thousands of young people across the UK find out where they’ll be studying for the next three years. It’s an exciting and scary time – both for students as they prepare to leave home, and for their parents as they watch their son or daughter start living independently.

The last thing they should be thinking about is how they’re going to afford it.

But we recently published research that sets out for the first time the financial pressure students face, and the impact this can have on their relationship with money as they move into work.

We found that at more than a quarter of universities across the UK, a student from a low-income household in England would pay more than half of their student support on their university halls, even if they took the cheapest room available. And if they lived in the average accommodation outside of London they’d have just £350 a month to live on after paying for their accommodation. To put that into context, it’s roughly the same as someone on a £21,000 salary spending over £1,000 a month on rent and bills.

We’ve also combined our figures with research from the Department for Business, Innovation and Skills to work out how much extra students would need to live on. For high-income households that could be as much as £750 a month – and even students from the lowest-income households need nearly £350 a month.

All of this puts financial pressure on students and their families. But even more worryingly, it sends young people the message that being unable to make ends meet is normal, right at the start of their journey to financial independence.

We don’t think that’s the right thing to tell students – and it means they risk relying on their overdraft or credit cards to see them through. Unlike student loan debt, this will eventually have to be repaid whatever they’re earning, storing up potential problems as they move into work.

The student finance system is a major way in which people engage with their money, so it’s vital that students’ ability to manage their money isn’t undermined straight away. We don’t think these problems are difficult to fix, but they need action from governments and universities across the UK, including:

  • Financial education for all young people, including information on student finance and budgeting.
  • Universities and governments to work together to make sure student support covers reasonable accommodation and living costs.
  • Monthly payments of student support, to help with budgeting and to reflect how most people manage their money.
  • Better and earlier information for parents about how much they’ll need to contribute.

The tuition fee system is controversial, but it at least means every student can pay for their course. Now we need to make sure they can also afford to live.

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You can read our full findings, and our full list of policy recommendations for universities and government, in Set up to fail? The reality of money management at university.