Much has been written about the financial challenges many students face in going to university, and the fact that maintenance loans fall quite some way short of covering the cost of living for students.
Much has also been written about the national trend of mature students numbers coming to university being in decline, with particular implications for certain sectors such as healthcare, where we are struggling to meet workforce need.
These two areas of concern are quite likely related and linked to what we believe is a fundamentally unfair and regressive policy which impacts people who are in receipt of Universal Credit.
Under the current Universal Credit (UC) system, for people who are in work, UC is reduced by 55p for every £1 earned as income.
However, if you are entitled to receive Universal Credit and decide to go to university, for every £1 you receive in maintenance loan funding, your UC entitlement is reduced by £1 – and not by 55p as is the case for earned income.
Make it make sense
On the face of it, this seems highly inequitable – why should income derived from a student loan (which will, of course, need to be repaid with interest) be treated more harshly than earned income?
Another reaction to this approach might be to ask, “Why wouldn’t students who are eligible to receive UC simply not draw down their maintenance loan at all?”.
Unfortunately, this option is not open to those students, because the rules around reductions to UC make clear that the pound-for-pound deductions from UC are based upon the maximum maintenance loan for which you are eligible, regardless of whether you actually take the loan.
It is worth highlighting that, in general, full time university students are not eligible to claim Universal Credit. However, exceptions do apply, such as if you are under 21 and do not have parental support, or if you are responsible for the care of a child (the full list of eligibility criteria can be found here). In other words, students who we know are more likely to need additional support to be successful in higher education.
The Child Poverty Action Group have dedicated information for students who are entitled to claim UC, to explain the impact of having access to a maintenance loan on their UC payments.
In their worked example, a single mother of a 3yr old child, living in private rented accommodation, could have UC payments of £1399.60 reduced to £475.71 per month as a result of going into full time higher education and having access to a maintenance loan.
In other words, this mother would be taking on a personal loan debt of well over £900 per month – on top of the cost of tuition fees – which would otherwise have been paid as UC if she had not decided to access education.
We believe that this scenario may be without precedent in terms of our UC and wider benefit system, in that we know of no other situation in which someone who is entitled to claim benefits would be told that they need to take out a personal loan to replace their benefits entitlement.
In a recent ministerial question on this issue, the government explicitly confirmed that:
…successive Governments have held the principle that the benefit system does not normally support full-time students. Rather, they are supported by the educational maintenance system.
This principle may have been fine when maintenance support was distributed as a grant rather than a loan, but we would argue that there is something deeply regressive about asking students from backgrounds who are already less likely to access education to forego benefit support to which they would be otherwise fully entitled.
Breaking down barriers
The current government has set out an ambitious set of missions to “Build a Better Britain”, which includes a mission to “Break down the barriers to opportunity at every stage”.
We would argue strongly that the impact of having access to a maintenance loan on UC payments is an unfair and unnecessary barrier to students who wish to access higher education, and may well be a significant factor in why some mature learners are seeing university study as a less attractive option.
Finding and fixing barriers of this kind – which could be easily addressed by allowing students who are eligible to access UC to continue doing so – would be entirely consistent with this government’s mission.
DfE gives, DWP takes. Integrated policy making and implementation at its worse. As usual, the least well-off pay.
As someone who entered higher education as a young single parent back in the days of grants and top-up loans I can testify to how transformative gaining a degree was for me and my family. Three decades later I am in a job I love, working in a role which contributes to widening participation and social mobility, have been able to financially support my widowed mother when she needed help and supported my son through his HE journey as a mature student. My main motivator of going to university was to make a better life for myself and my child, gain the qualifications for a ‘good’ job and be self-sufficient. That journey hasn’t been a smooth one but it was only possible because the funding was there. Instead of becoming a burden on society, reliant on social housing and benefits, both myself and my son have graduate level jobs which give back to society. Surely this is what we need more of? I genuinely don’t think I could have taken that gamble if it meant taking on huge loans and giving up the (meagre) benefits that were supporting me and my child. The system needs to encourage and support single parents (and others who qualify for universal credit as students) not put them in a position of risking what little financial security they have in the hope of a better future, especially when that future now comes at the cost of often lifelong loan repayments.
I completely agree. The introduction of the LLE offers a moment to correct this clear injustice and remove an unnecessary barrier to opportunity. The Government should seize it.
IHE argued for this in our Manifesto for Higher Education last year: https://ihe.ac.uk/manifesto-higher-education/student-support
Someone should start a judicial review of the DWP’s treatment of student maintenance loans as income for Universal Credit, and I wondered if I could ask your opinion.
Structural Conflict Between DWP and SFE
There is a fundamental incoherence in how the UK Government administers support:
One department (SFE) gives a loan to support subsistence and study;
Another (DWP) then treats that repayable debt as income, effectively reclaiming it by reducing UC entitlements.
This creates a policy contradiction, where state support is neutralised by another arm of the state, undermining the legitimate expectation that a loan would support – not harm – the student.
Possible Illegality / Misinterpretation of Law.
There is no primary legislation compelling the DWP to treat student loans as income; instead, the Universal Credit Regulations 2013 interpret it broadly, potentially ultra vires in this context.
DWP’s “double support” justification.
Why the “Double Support” Argument Doesn’t Hold Up:
– Loan Repayment Obligation: The fundamental difference between a maintenance loan and a benefit is the legal and financial obligation to repay the loan with interest. Benefits, generally, do not need to be paid back (unless overpaid due to error or fraud). This repayment obligation means the money received as a loan is not a permanent increase in financial resources.
– DWP Effectively Clawing Back the Loan: by treating the maintenance loan as income and reducing Universal Credit entitlement, the DWP is effectively taking back a significant portion (1£ for 1£) of the funds intended to support the student’s living costs. The student receives the loan but then has their benefit reduced, leaving them with the same or potentially even less overall support while simultaneously accruing debt.
– No Net Gain: Unlike genuine income (e.g., earnings), the maintenance loan doesn’t represent a net gain in the student’s financial situation in the long term. It’s a temporary provision that creates a future liability. Treating it as income ignores this fundamental aspect.
– Benefit is for Basic Needs: Universal Credit is intended to provide a safety net for individuals who don’t have sufficient resources to meet their basic living needs. Reducing this support based on a loan that also aims to cover basic needs seems counterintuitive and undermines the purpose of the benefit.
– Circular Flow of Funds: The student receives money intended for living costs (the loan from state), and the state (through the DWP) reduces other funds intended for living costs (Universal Credit) by a similar amount. The student is left with the debt but hasn’t actually received additional disposable income.
– Disincentive to Borrow: Treating loans as income could disincentivize students from taking out the full amount of maintenance loan they might need, fearing a significant reduction in their benefits, potentially leading to greater financial hardship during their studies.
Why They Should Be Classed Differently:
– Legal Definition: a loan has a distinct legal definition as a debt requiring repayment, unlike income which is a gain or profit.
– Economic Impact: Loans create liabilities, while income increases net worth. Their economic impact on an individual’s financial situation is fundamentally different.
– Purpose: Maintenance loans are specifically for supporting living costs during study and are tied to an educational purpose. Benefits are for general living support based on need.
– Repayment Mechanism: Loans have specific repayment terms and mechanisms (often income-contingent for student loans), whereas benefits do not.
“DWP Takes It Back” Analogy :
It perfectly illustrates the illogicality of the situation. The Student Loans Company provides funds to help the student survive their studies, but the DWP then reduces the student’s essential living support by a corresponding amount, leaving the student with the debt burden without the intended financial relief.
Moving Forward:
This clear articulation of the “double support” fallacy and the inherent difference between a repayable loan and non-repayable benefits is a crucial element. It highlights the flawed logic of the current regulations and their detrimental impact on students relying on Universal Credit.
I believe this raises issues under A1P1, Article 14, and possibly Article 8 ECHR, especially where the maintenance loan is a repayable debt and Protocol 1, Article 2 protects your right to an effective education.
I am challenging:
Illegality (the decision-maker acted outside the law)
-Irrationality or unreasonableness
-Procedural unfairness
-Disproportionality
-Incompatibility with human rights or discrimination law
Also the dwp regulations should be hierarchical below the primary law and international law (ECHR and others), which in this situation they act as above.