Affordability concerns to force review of Welsh student support

The Welsh government will have to review whether it can continue to maintain its “generous” student support system amid rising costs, according to a policy paper on the future of the tertiary sector.

An evidence paper that examines the challenges facing further and higher education released by the Welsh government on 21 January notes that decisions made in England were placing greater pressure on Welsh institutions to ensure student loans “remain sustainable”.

The report notes that Wales offers a “generous and progressive” student maintenance support package. While all undergraduate students receive the same total amount of support, those from the lowest income households receive higher grants. 

Additionally, maintenance support in the country increased in line with the National Living Wage between 2018-19 and 2024-25, while total maintenance support was increased by the forecast Consumer Price Index measure of inflation.

However, the Welsh government student loans outlay has “risen significantly in recent years, particularly for full-time maintenance loans, as both total loan entitlements have increased and the proportion of students eligible for the largest loan amounts has also increased along with household incomes”.

While fiscal drag has reduced the numbers of students eligible for the most generous grants, with grants falling from 32 per cent of total student support expenditure in 2020-21 to 23 per cent, student loans have increased from 68 per cent to 77 per cent

The average annual maintenance loan for a full-time undergraduate student from Wales rose from £5,110 to £8,150 – a hike of 59 per cent – between 2020-21 and 2024-25, exceeding the English average for the first time.

The report further argues that the UK government’s decision to freeze student loan repayment thresholds at £29,835 between 2027 to 2030 for borrowers in England “demonstrates the increased pressure to ensure that the long-term costs of the student loan book remain sustainable” across the UK.

It continues: “These pressures will likely require The Welsh Government to review and amend its ongoing policy on student support outlay, and student loan repayments, to maintain appropriate controls on expenditure and continue a policy that aligns with Welsh Government’s policy aims.”

The report adds: “Given the uncertainty involved in such modelling, this means that The Welsh Government can no longer afford to increase overall student loan outlay at a greater rate than The UK Government. 

“The UK Government has announced that maintenance loans for English domiciled students will continue to rise by inflation for the remainder of the current parliamentary term. These financial constraints present a challenge for ongoing student support policy in Wales.”

Overall, the report noted that three-quarters (six out of eight) of universities reported an underlying deficit in 2023-24, and the total sector income fell by 6 per cent in real terms between 2021-22 and 2023-24.

Vikki Howells, minister for further and higher education, said the challenges facing post-16 education are “too complex for us to solve alone”. 

“We have already delivered reforms to the post-16 sector, including establishing Medr and maintaining our approach to student support, but we cannot ignore that there are further challenges that need to be addressed.”

juliette.rowsell@timeshighereducation.com