Martin Lewis: Students in England ‘dealt a blow’ as Government plans to increase maintenance loans by just 2.8% - what you need to know
Struggling students have been “dealt a blow” as loans to help with living costs will fall far short of rising inflation, based on Government plans. From September, English students will see a real term cut to maintenance loans of 8p in the £1 - a shortfall students or parents will have to make up for themselves.
For the 2023/24 academic year, both new and existing English students, regardless of where in the UK they study, will see a 2.8% increase in the amount they receive from a maintenance loan to help with living costs. But this uplift falls well short of the current rate of inflation, which stands at 10.7%. Meanwhile, the Welsh Government has increased loans by 9.4%. See below for more information on this.
MoneySavingExpert founder Martin Lewis has called it a "poor outcome for social mobility”. The National Union of Students (NUS) added: “The 2.8% increase in the maintenance loan for 2023/24 is woefully inadequate and will leave students over £1,500 worse off than they would have been if student support was tied to inflation."
As a result, even the maximum maintenance loan - which only students from the lowest-income households will get - may well not be enough to cover some students soaring student living costs. And for students who get less than the maximum - which is anyone with a family income of £25,000 or more - the Government expects parents to top up the difference, which many will find challenging this year when household incomes are already being squeezed.
Here's what Martin says in full:
This will feel like a blow to many English students. It is a cut in real terms of around 8p in the pound in the living loan for those starting in September – which many already find close to the affordability bone. Many from low income backgrounds only have the state support to rely on, so this is an absolute cut in income and I worry that, especially when compared to the increasing costs of rents, energy and food, it will end up putting off some from those backgrounds from going to university – which would be a poor outcome for social mobility.
“Remember too, that unlike a pay increase, this is a state-backed loan, repaid once students leave university, so the cost of increasing it is far less. And that’s never been more true because this September radical changes to the student finance system (such as repaying for 40 not 30 years) means graduates will shoulder a much bigger burden of their university costs - with the state estimated to only cover 19% of it, compared to the current 44%.
“The only silver-lining here is for parents. As the government, after much campaigning, is more open about what we’ve been saying for years - that there is effectively a means-tested parental contribution towards student living costs. As the student loan hasn’t gone up with inflation nor, on paper at least, will the parental contribution (as that's effectively the difference between the loan received and the full loan). In practice though, if the state support levels are too low, as well as urging their offspring to work while at uni, many parents will simply feel they have to try to add more on top to make their university time survivable.”
Maintenance loan rise falls short
The Government has used a forecast of inflation at the beginning of 2024 to calculate the 2.8% rise in the maintenance loan. However, had it increased it by 10.7% - the current rate of inflation - a student living outside of London would get almost £770 more next year, while a student living in London would receive almost £1,000 more - as shown in the table below:
|Loan with a 10.7% increase (1)||£9,045||£10,745||£14,022||£12,305|
|How much less students will get||£646||£768||£991||£878|
We've asked the devolved nations if they plan to increase student maintenance loan rates for their residents.
The Welsh Government will be increasing its student maintenance support by 9.4% for both full-time and part-time students for the 2023/24 academic year, meaning the maximum amount for a full-time Welsh student living away from home and studying outside London will rise from £10,710 a year to £11,720 a year.
In Wales, you can choose to be income-assessed when applying. If you do, then your household income (your income and that of your parents or your partner if you live together) will determine what support you get. If you don't do an income assessment, you'll only get the basic support.
We've asked the Scottish and Northern Ireland governments for their plans and will update this story when we know more. For more information on student loans and how they work, see our Student Loans guide.
Be warned - the maintenance loan is means-tested and if you're under-25, it's based on your parent's income
In England, the maximum loan amount depends on whether you live at home or go away to study. Within that, for most under-25s the amount is means-tested based on annual family income - the higher the income, the lower the loan. The loan amount starts reducing with family income of just £25,000 a year - and many parents are unaware that the system implies that they should make up the shortfall, which can be £1,000s.
For example, if you live at home and are studying in the current 2022/23 academic year, the minimum loan amount you can get is £3,597 out of the maximum £8,171. The difference between what you get and the maximum, in this case £4,574, is the expected parental contribution. This parental contribution is required just to get the student up the amount the government sees this as the bare minimum needed to cover living costs during the academic year. And even this is unlikely to be enough.
The exceptions to this are if you're eligible for benefits, if there's one or more financially dependent children in your household, or if you've applied for supplementary support - here, your parents' income is assessed in a different way. See our Student Loans guide for full info on how this works, plus how it works in Scotland, Wales and Northern Ireland.
The NUS has described the rise as 'woefully inadequate', while some students say their loan already barely covers the rent
Commenting on the 2.8% rise introduced by the Government, Chloe Field, vice president (higher education) at NUS, said: "The government must go further to protect students in the long term, by increasing the value of the maintenance package, implementing a rent freeze and further controls on spiralling student rent, reducing transport costs and increasing the minimum wage for apprentices and young people.
“The 2.8% increase in the maintenance loan for 2023/24 is woefully inadequate and will leave students over £1,500 worse off than they would have been if student support was tied to inflation. More than a quarter of students are living on less than £50 a month after rent and bills. If maintenance support continues to lag behind inflation, the number of students in poverty is only going to increase."
Some students have also taken to social media to complain about the rise, with some suggesting their maintenance loan is barely enough to cover the cost of their rent.
Here's what we saw:
Changes have been made to ensure students have clearer guidance - but it's still not clear enough
In June 2021, MoneySavingExpert.com founder, Martin Lewis wrote to Michelle Donelan MP (who was minister for education at the time) requesting improvements to official student finance information on maintenance loans for those in England. Martin called on the Government to make clear the implicit "parental contribution" built into the student finance system – arguing it needed to be made explicit.
Following Martin's calls, in November 2021, Ms Donelan wrote to Martin and committed her officials to working with the Student Loans Company (SLC) to ensure that future communications with students explain the difference between an individual’s maintenance loan and the maximum possible award.
As a result, changes to the pre-application web information for English prospective students were made and it has been restructured to explain:
- That the maintenance loan students receive may be less than the maximum amount.
- That the calculation is based on a student’s household income.
- And why this means additional funding may be needed.
It now says: "Students are expected to make up the difference between the Maintenance Loan amount available and their total living costs. Financial support may be provided by the students’ parents or partner."
This an improvement, but even with these changes, the parental contribution still isn't made as explicit as we would like, so we've put in suggestions to improve it.