Uni students deferring places due to cost of living crisis, as one in seven fear becoming homeless

Two thirds of students are struggling to afford their housing costs and one in seven fear homelessness within the next six months, as escalating bills, rent and food prices pile pressure on their limited finances.

The study from Nationwide Building Society claimed that two thirds of current students had either already fallen behind on their rent or were struggling to afford it. 

It also found that 22 per cent of students knew someone who has become homeless within the last year due to financial difficulties – whether that meant sofa surfing, staying in a hostel or rough sleeping. 

Nine in 10 students are growing concerned that they will not be able to afford basic essentials, as the cost of living crisis has seen prices for housing and food rise by 10 per cent

The cost of living crisis has seen homelessness rise significantly this year. The latest Government figures show an 11 per cent increase in those who became homeless or were at imminent risk of homelessness in the three months to March 2022. 

Almost three quarters of students have had to borrow money from family members to pay for essentials such as food and rent in the last year, according to Nationwide, and four in 10 are relying on their overdrafts to cover such necessary outgoings.  

While four in five A-Level students applied for a university place, 15 per cent are now considering deferring their course for a year because of the cost of living crisis. 

A third of UK students have said they were worried about the cost of university and whether their £9,000 yearly tuition fee was worth the money. 

Over 90 per cent of A-Level students have said the cost of living crisis has affected how their feel about attending university this year. 

And according to research by temporary jobs website Indeed Flex, 3 per cent of university applicants have already deferred their acceptance until 2023. 

Around two thirds of UK students are worried about affording their accommodation, as one in five students know someone who is now homeless, either sofa-surfing or rough sleeping

Around two thirds of UK students are worried about affording their accommodation, as one in five students know someone who is now homeless, either sofa-surfing or rough sleeping

Cost of student basics is going up 

As well as big costs such as rent and bills, the price of everyday essentials such as food is also a concern for many students. 

For the students currently attending university, the cost of living crisis has sparked more concern for affording basic amenities and essentials alongside tuition.

Almost two-thirds of university students have said they are most worried about how they will be able to afford food once the new term starts in September, according to new research by investment platform Interactive Investor.

It said the cost of student living had risen 9 per cent over the year to June 2022 – and with inflation now at 10.1 per cent, that could be set to rise further. 

INCREASES IN ESSENTIAL STUDENT COSTS FROM 2021 TO 2022
Inflation on student basicsAnnual inflation
Food8.2%
Alcohol1.3%
Clothes and footwear6.1%
Student accommodation4.4%
Private rental costs11%
Energy70%
Public transport4.25%
Entertainment events 13.2%
Books2.6%
Restaurants and cafes7.4%
Takeaways9.5%
Laptop-4%
Average for most students8.9%
Average for private renters12.3%
Data supplied by Interactive Investor

Three out of five are worried about how they will afford their accommodation, while half are concerned they won’t be able to afford nights out, and are worried about meeting the cost of tuition fees.   

For students living in private rented accommodation, the overall rate of rent inflation was 12 per cent over the period, according to Interactive Investor, while soaring energy bills were the biggest inflation driver for students, as for everyone, up 70 per cent over the period.

The cost of going out also surged, with the price of going to the cinema, theatre or concerts up 17 per cent, and the cost of sporting events rising 10 per cent.

The cost to dine at restaurants and cafes has increased by 7 per cent, and takeaways also got pricier, up 10 per cent in the last year.

Food prices jumped by 8 per cent and train prices by 5 per cent, while books, a student staple, saw a more modest uptick of 3 per cent.

More students will take on part-time jobs 

Given the rising costs, more students are choosing to take on jobs while at university. 

According to Indeed Flex, 48 per cent of current students have worked during their time at university, with a fifth (22 per cent) doing part-time or temporary work all year round to cover their additional costs. 

This is set to rise, with a third of sixth form students who are planning to attend university in the autumn saying they intend to work all year round and not just in the holidays. 

Extra cash: A third of current sixth form students say they plan to work all year round while at university, to help them manage rising costs

Extra cash: A third of current sixth form students say they plan to work all year round while at university, to help them manage rising costs

Novo Constare, co-founder of Indeed Flex, said: ‘Going to university and living away from home for the first time is an exciting and important stage in many young people’s lives. 

‘But our research suggests that many would-be students aren’t just worried about what next week’s A-Level results day will bring; the rising cost of food, rent and bills is also weighing on their minds. 

So much so that a third are even questioning whether their chosen degree course will be worth the expense at all. 

‘Generations of students have found that taking on temporary work, whether during holidays or fitted in around lectures during term time, is a great way to top up their student loan.’

When do you start repaying your student loan?

If you have a Plan 1 student loan: You’ll only repay when your income is over £388 a week, £1,682 a month or £20,195 a year (before tax and other deductions).

If you have a Plan 2 student loan: You’ll only repay when your income is over £524 a week, £2,274 a month or £27,295 a year (before tax and other deductions).

If you have a Plan 4 student loan: You’ll only repay when your income is over £487 a week, £2,114 a month or £25,375 a year (before tax and other deductions).

If you have a Postgraduate Loan plan: If you took out a Master’s Loan or a Doctoral Loan, you’ll only repay when your income is over £403 a week, £1,750 a month or £21,000 a year (before tax and other deductions).

Graduate salaries on the rise 

One piece of potential good news for those heading to university is that graduate salaries have risen at a record rate, according to the Institute of Student Employers.

The ISE found that the average graduate pay jumped by 7 per cent this year, with some employers increasing salaries by 20 per cent: the sharpest rise in 20 years. 

On average, graduate salaries have risen 2 per cent per year since 2002. The last time pay spiked was just before the financial crash of 2007-8, when pay increased by 5 per cent in 2006.

According to the ISE, the median starting salary for graduates in 2021 was £30,500 while the median starting salary for school and college leavers was £19,489.

But despite this, students are still concerned about how they will pay off the cost of attending university. 

According to Indeed Flex, 37 per cent of students are worried about paying off student loans in the future, while 35 per cent have questioned whether getting a degree was worth the money. 

So far, 5 per cent of future university students have already changed their choice of degree subject because they are worried about their work prospects when they graduate. 

Rising student loan interest rates are also worrying a third of prospective students. 

The Government capped the repayment interest rate at 7.3 per cent after it was predicted to reach 12 per cent in line with soaring inflation, a two-thirds increase on the previous interest rate of 4.5 per cent.

How can parents best support student children? 

Experts have suggested that rising interest on student debt could lead to a rise in parents supporting their child’s tuition costs.

However, they said that parents should think carefully before doing so. While interest will be higher, students still have a long time in which to clear their loans.  

Laura Newman, head of specialist advice for NatWest said: ‘Parents want to give their children the best start in life, and the idea that your child could leave university debt free is attractive.

‘However, student loans are written off after 30 years if they have not been repaid and many never repay them at all. 

‘The recent interest rate cut is also likely to only benefit the minority of the highest-earning graduates who will pay off their loan in full, with many students expected to be taking their pensions while paying off their loans.

‘Encouraging your children to take out a student loan can be a good way to get kids into good savings and spending habits – learning the importance of financial planning and forming part of their financial education.

‘For those that do want to provide some financial help, starting saving early is key. 

‘Parents and students should take the time to think carefully about their options around how to ease the financial burden before making any sudden decisions.’  

Helping hand: If parents wish to support their children at university, they should start saving early according to investment experts

Helping hand: If parents wish to support their children at university, they should start saving early according to investment experts

Another option for students is to turn down one or both of the available student loans, and attempt to pay for fees or living costs as they go – either on their own through savings and part-time work, or with their parents’ support. 

They could also opt to overpay their loan beyond the required minimum each month after they graduate, in order to clear it quicker.  

Alice Haine, personal finance analyst for Bestinvest, says this might not always be the most sensible financial strategy.

At the moment students can only be asked to make loan repayments for 30 years, after which time the balance will be written off. Under the new system from 2023, that limit will be extended to 40 years. 

If they never earn a large salary, they could only end up repaying a fraction of the loan – although interest will still mount up.  

‘While the fear is that enormous interest payments could balloon a loan to unmanageable levels, the reality is that many will never repay the full amount,’ Haine said. 

‘The Government only expects about 20 per cent of full-time undergraduates to repay that debt in full, so labelling the student loan system as debt is a bit of a misconception. 

‘If a graduate never earns more than £27,295 during their career, then they will repay nothing under the current system. Earn over that amount and the repayment amount is set at 9 per cent of everything they earn over £27,295.’

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