Students in England are being hit by stealth cuts and tax rises by a government which is using high inflation to “quietly tighten the financial screws”, according to the Institute for Fiscal Studies (IFS).
The IFS paper highlights a series of ways in which inflation is eroding the value of student loans and tuition fees, enabling the government to claw back money from students and universities to the tune of £2.3bn.
The report, published on Thursday, comes at a time of concern about the impact of the cost of living crisis on already hard-up students and uncertainty about the future of higher education funding.
According to the IFS thinktank, students will see substantial real-terms cuts to the value of maintenance loans, with the parental earnings threshold frozen at £25,000 when it should have risen to £34,000, meaning many students are not receiving full maintenance loans.
In addition, the IFS says the rate at which the level of maintenance loans will be increased – at 2.3% – falls short of both the current level of inflation and predicted levels for the year ahead. “This means that many students will see their maintenance loans cut in real terms, even though the real value of their parents’ incomes will also have fallen,” the report said.
The IFS also highlighted the recent government decision to freeze the student loan repayment threshold at £27,295 rather than applying the current rate of inflation, so that a graduate earning £30,000 will need to pay £113 more towards their student loan in the next tax year than originally agreed.
Tuition fees meanwhile remain frozen for the fifth year at £9,250 which amounts to a 15% real-terms cut in the level of tuition fees over the past decade, the IFS said, hitting university income hard. “On the whole, as our updated student finance calculator shows, the government is saving £2.3bn on student loans under the cover of high inflation,” the IFS paper concluded.
Matt Western, Labour’s universities minister, said: “The Conservative party’s cost of living crisis is hitting people’s pockets, yet the government’s response is to raise taxes on working people, introduce a buy now pay later energy scheme, and use a smokescreen to hammer students and graduates.”
Ben Waltmann, senior research economist at the IFS, said: “The government seems determined to use high inflation as a cover for reducing the taxpayer cost of student loans. Large real-terms cuts in maintenance loans could cause genuine hardship for students on tight budgets.
A Department for Education spokesperson said: “Our student finance system was designed to ensure those from the poorest families get the most support whilst they study. Those students currently have access to the largest ever amounts of living costs support in cash terms and we have increased maximum loans for living costs over the last two years.
“The student loan system needs to be fairer for both students and the taxpayer. With graduate salaries rising it is only fair to ask borrowers who are benefiting financially from their higher education make a reasonable contribution towards its costs.”
Another education report meanwhile, also published on Thursday, has confirmed that the gap between poorer pupils’ GCSE grades and those of their wealthier peers has failed to improve over the last 10 years.
The Education and Policy Institute found however that fears that the switch to teacher assessed grades for GCSEs in 2020 would penalise disadvantaged students were unfounded, though the grade gap widened in 2020 for students in college and sixth form as A-level students gaining a grade more from teacher assessments than those who studied BTecs which more disadvantaged students take.
