General
19 Nov 2008

University students get welcome economic news – student inflation is down

Part-time student inflation higher

Part-time student inflation higher

The cost of living for higher education students in the UK has dropped dramatically in the October Student Price Index (SPI) compiled by Open University economist Alan Shipman.

In October, when CPI inflation slowed to 4.5% (from its peak of 5.2% in September), the OU Student Price Index for full-time students in England dropped almost two points to 4.7%, from 6.4% in September.

“Students are still suffering from higher inflation than the average. This is due to the past year’s rapid rise in housing, food, tuition and travel costs, which absorb much more of their student budget (around 60%) than the average person. Slower tuition cost inflation is the main reason the differential over CPI has narrowed,” Shipman said.
For part-time students the rate was higher at 5% in October. Part-time students spent a higher proportion (than full timers) on housing and transport costs, including fares and fuel when prices rose rapidly over the past year.

The rises are lower in Wales and Northern Ireland because housing is a smaller component of student budgets. And lower in Scotland because of lower tuition costs.

In Wales part-timers are still experiencing lower inflation than full-timers, which was also the trend in England in the third quarter. Welsh students have a lower proportion spent on housing (than full-time students) that outweighs their proportionally greater spend on food and transport.

“The differential over general inflation has narrowed,” Shipman said, ”but students’ living costs are still up much faster than for the general population in the past year. Going forward, we expect students to get some relief from falling accommodation costs, but there’s no reason to expect the differential over general prices to close.”

October 08 September 08

CPI 4.5% 5.2%

SPI
England part-time 5.0 6.7
England full-time 4.7 6.4

Wales part-time 3.8 5.7
Wales full-time 4.5 6.4

N Ireland part-time 3.6 5.7
N Ireland full-time 2.4 4.7

Scotland full-time 2.7 4.2

When The Open University began the student price index (SPI) in July 2008, consumer price inflation (on the CPI) was running at 4.4%. We found that living costs for students in England had been rising significantly faster over the past year than living costs for the general population, given by the CPI. For full-time students in England the (SPI) inflation rate was 6.6%, one-and-a-half-times the general inflation rate. For part-time students in England inflation was slightly lower, at 6.4%.

Compared with the average adult, the OU student expenditure ‘basket’ captures the much higher proportion of income that students spend on four essential items – accommodation, travel, food, and (of course) tuition. These four items account for around 60% of students’ spending, almost twice the proportion for non-students. And they are all items whose cost has risen much faster than average prices over the past year. Inflation was slightly lower for part-time students mainly because they spend a lower proportion of their income (than full-timers) on housing and tuition – even though they spend a slightly higher proportion on food (reflecting the fact that more have children to support) and travel (because most are also working and have to travel to work).

Student inflation rates were slightly lower in Wales and Northern Ireland, largely attributed to lower housing costs. (These are around 15% of student spending in Wales and 13% in N Ireland, compared with over 20% in England on average). In Scotland, where the student inflation rate was 5% in July, it is mainly the absence of tuition fees that keeps the rate below England’s, though accommodation also takes a slightly lower proportion of the budget.

Since then the CPI inflation rate has accelerated to 5.2% in September. The student inflation rate in England has risen to 6.4% for full-timers and 6.6% for part-timers. The part-timers’ rate has gone above full-timers – reverting to the pattern of 2006-7 – because of rising transport costs, In Wales it’s 5.7% for part-time and 6.4% for full-time students; part-timers’ tuition cost advantage is still effective here, and also Welsh part-timers spend less of their budgets on food (than full-timers), in contrast to England, as well as spending a lower proportion on accommodation.

Universities UK defines a full-time student as meaning a requirement to attend the institution for an average of at least 21 hours a week for at least 24 weeks a year.

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