The findings of a study reveal those at college or university spent 10% less on their basic living costs last year, compared to 2011.
Their annual living costs in 2012 were equivalent to £9500 per year, compared to £11,000 the previous year.
The rate of inflation for UK students since 2004 has been 4.5% per annum and annual costs are likely to reach more than £12,000 by 2018. Rent remained the single biggest cost for most students, at £171 per month, but this figure hides regional variations and the fact that students in some cities will need to pay significantly more. Spending on food fell last year by around 3% and the monthly food shop was likely to have come in at £72 while spending on transport fell to £75, from £116 in 2011.
This is only the second time that student living costs have fallen on an annual basis since 2004 when figures for student households first became available.
The long-term trend, however, indicates that student households are experiencing annual increases in living costs of 4.5% per annum and by 2018, student living costs are likely to be £1032 per month or more than £12,000 per year.
Although rent accounted for £171 a month in 2012, students spent only £16 on alcohol and tobacco per month and £36 on clothing. Transport accounted for £75 and communications such as mobile phone bills £22.
Kate Moore, head of savings and investments at Family Investment, which carried out the research, said: "Students spent 10% less in meeting basic living costs, according to our analysis of official figures.
"We know that the cost of everyday items is rising, which suggests that students are cutting back their spending rather than seeing the cost of living fall.
"While the short-term trend points to students cutting back on their expenditure, student living costs are up over 35% since 2004, when monthly bills averaged £615."
She said tuition fees south of the Border were also having an impact.