Cost of living for students swells by 9% in a year, ii finds

interactive investor's Myron Jobson outlines cost-cutting tips for new and existing students.

Millions of students face a rise in living costs far in excess of the slight increase in support from maintenance loans when the new academic year begins.

This follows a 9% annual increase in the prices of popular student basics* over the year to June 2022, according to research by interactive investor, the UK’s second-largest DIY investment platform.

For students living in private rented accommodation, the overall rate of inflation is 12% over the period (based on private rental figures from Zoopla).

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Soaring energy bills were the biggest inflation driver for students, as for everyone, up 70% over the period, ahead of the cost of running a car (up 21%).

The cost of going out also surged, with the cost of going to the cinema, theatre/concerts, attending a sporting event, and dining at restaurants and cafés up 17%, 10%, and 7%, respectively. Takeaways also got pricier (up 10%).

The cost of food jumped by 8% and train prices by 5%. However, books, a student staple, saw a more modest uptick of 3%.

Meanwhile, student maintenance loans have failed to keep up with rising costs.

The student maintenance loan for English students has risen by just 2.3% from 2021-22 to 2022-23 (£9,488 to £9,706 on the maximum loan for English students outside London), compared with the ‘student’ inflation rate of 8.9% (see table below).

Popular student basics

Source: Figures from ONS - apart from rent - general student rent from NUS data, private rent from Zoopla data

Commenting, Alice Guy, Personal Finance Expert, interactive investor, says: “Many students will be choosing between heat and food this winter as maintenance loans fail to keep up with inflation. Rent costs are also expected to further rise this winter.

“The inflation rate for students who are renting privately is higher (12%) because it’s based on the latest private rental figures from Zoopla, rather than historic NUS rental figures. Those going through clearing will be scrabbling around to find a house and likely paying through the nose, so the latest private rental figures are much more relevant than the overall student rent.

“Student households are likely to find it tougher than most as they have limited disposable income and spend a large proportion of their budget on essentials with little wriggle room.

“Students who have the choice might want to opt for student halls or other accommodation where the cost of bills is included so it’s easier to keep track of their budget. Other possible tips include swapping foods for cheaper alternatives and cooking from scratch where possible. Also ditching the car in favour of a train or bus transport.

“It’s too late for current students, but those applying for university should weigh up the cost of living when they’re looking at universities as well as their courses and the university location. The average rent in some cities, such as Sheffield and Nottingham, is half as much as the most expensive university towns such as London and Edinburgh.

“One ray of sunshine in the economic gloom is that the job market is going crazy, and students may find it easier to find evening or holiday jobs.”

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “For many students, hopes of living their ‘best life’ have been shattered by the need to maintain financial buoyancy amid rising prices. The 2.3% increase in maximum student grants and loans for living costs simply isn’t going to cut it when inflation is expected to hit double digits this year and remain high for some time.

“The worry is that the sheer scale of inflation will be a rude awakening for new students, and with the Bank of Mum and Dad also facing its own cost-of-living challenges, it can’t be relied on to offer financial support. No student should have to worry unduly about their financial situation while they are focusing on their studies, but the reality is that a large number will need to work part time to support themselves.

“The extent of the cost-of-living squeeze varies by living arrangement. Those who have successfully secured a room in purpose-built student accommodation that offers rent inclusive of utility bills needn’t worry about the rising of the energy prices cap in future, which is set to lead to an eye-watering rise in household energy bills. It is unlikely they will raise rents in the middle of the semester to weather heightened costs.

“However, students who live in a shared house are likely to be impacted more. Four people living together, all with different attitudes towards energy usage in relation to bills, could be a recipe for rows. And with each having a vast array of electronics ranging from a mobile phone, laptop, TV and video games console, together with shared amenities, it will become quite expensive. Some house-share arrangements include utility bills and others don’t, so it important for students to check your tenancy agreement. Students, mature students or otherwise, with their own homes are likely to be impacted most.

“The rising costs are also a concern for those who are about to graduate. Graduates following the familiar pattern of leaving student accommodation to a form of private residence will have a host of costs to cover, including rent, rising food, and energy bills. As such, moving back to the family home is becoming more of a valid option for many graduates.”

Saving tips for students

Myron Jobson outlines cost-cutting tips for new and existing students.

Budget

Budgeting is integral when it comes to keeping your financial house in order. It allows you to plan how much you will spend or save each month as well as track spending habits.

It’s worth keeping a spreadsheet of your own spending habits. There is a plethora of budgeting templates available for free online as well as apps to help you on your way.

The rising cost of living means we are saving less to maintain current levels of spending, so be prepared to make tweaks to your budget as inflation continues to rise.

Once you have a better idea on how you spend your money, you can explore ways to help you live within your means.

Look out for exclusive student deals

There are loads of deals exclusively available to students, to help make their money go further. Such deals tend to be a percentage off the total price but could also include offers such as free trials or buy-one-get-one-free.

Available student discounts are not always made obvious by companies, so often students need to ask the question.

Save on food bills

Shop around for the best deals – especially for high-ticket items. Even simple things such as opting to purchase a store-brand equivalent of traditional larder products can help to cut down the cost of groceries.

Consider buying items in bulk so you are not constantly spending as prices continue to climb. It is also worth taking advantage of supermarket loyalty schemes - such as Tesco Clubcard and Nectar card – which can give you access to unlock big discounts and other exclusive rewards.

Shop around for the best deals

You won’t know whether you are paying over the odds for things unless you shop around for the best deals. For example, if you've been with a broadband provider for a while, it is likely that any introductory offers will have expired, and you might be paying more than you need to. The same goes for mobile phone contracts. Shop around to see if you can get a better deal.

Remember, financial support is available

Students struggling financially needn’t suffer in silence. Don’t be afraid to ask for support. There are advice and hardship funds are available at several universities. There are additional funds for those who need extra financial help as well as for students with children or dependent adults and students with disabilities. Students can also access cost-of-living support funds distributed by local councils to support residents struggling financially.

Investing for university education

Parents can help give their child a financial leg-up when they reach adulthood, which could help fund their university education, by investing in a Junior ISA. Money invested in a Junior ISA is locked away until the child reaches 18, and earnings are tax-free.

As most Junior ISAs are going to be inherently very long term, because they cannot be accessed until the child is 18, there is ample time for short-term bumps in stock markets to be ironed out. History shows that even a ‘middle of the pack’ fund can generate strong returns over long period - so, you don’t need to be an expert stock picker to benefit. The average global investment trust is up 460% over 18 years to the end of July, while the average global fund grew by 369% over the same period. Past performance is not an indicative of future results.

Key student cost of living statistics

• In 2021, the average student spent 52% of their living budget on rent, 12.5% on groceries and 5% on household bills. And inflation on all these “big three” items is far higher than the 2.3% maintenance loan increase (source: savethestudent).
• Energy bills are expected to triple this winter and food costs are up 9.8% from last year, leaving many students struggling to make ends meet.
• Inflation on student digs climbed 61% in the last 10 years, an average of 4.9% each year. In 2021-22, the average annual rent for purpose-built student accommodation in the UK was £7,374, an increase of 4.4% on the previous year (source: NUS).
• The Maintenance Loan is £340 less than the average student’s living costs (source: savethestudent).
• Two-thirds of students (66%) turn to their parents for extra funds, with students getting an average of £120.56 a month from their mums and dads (source: savethestudent).