The amount of money Scottish students can borrow is set to jump massively next year at the same time as the number of university places for home undergraduates plummets.

A new report by the Institute for Fiscal Studies (IFS) said the Scottish Government was now spending around £28,700 more per student than it would if it were to adopt English arrangements for higher education funding and bring in tuition fees.

Currently, £900 million is spent each year on tuition for Scottish undergraduates who stay in Scotland to study.

The IFS say this is equivalent to £30,000 per student over their whole degree, which is “similar to funding per student in England, where degrees are typically a year shorter.”

Funding for places has dropped by around 19% in real terms per student over the last decade and is set to drop by 3.6% in 2024/25.

Under the current system, the IFS say that “boosting per-student funding requires cuts to student numbers or reallocating spending from other areas of the Scottish Budget.”

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The Scottish Government has recently hiked support for students’ living costs by increasing the amount students can borrow by £2,400 a year.

In their analysis, the researchers say that if there is a full take-up of living cost support, these changes would increase average lifetime loan repayments in real terms by around £5,000.

The IFS suggests that graduates, on average, will repay two-thirds of this additional loan, with the UK government meeting the cost of the remaining third in the long run as unpaid loans are eventually written off and paid for by the taxpayer.

Support for the living costs of Scottish students is worth around £600 million each year, through a mix of loans and grants.

From April 2024, the earnings threshold above which Scottish graduates make loan repayments will increase from £27,660 to £31,395.

In England and Wales, the threshold will be frozen at £27,295.

The Scottish hike will reduce monthly loan repayments for many by around £28, although the highest-earning half of Scottish graduates can still expect to repay their loans in full over their lifetimes.

The IFS notes that these “increases in generosity” will “not cost the Scottish Government a penny” as the UK government currently finances the issuing of loans to Scottish students, and bears the cost of any eventual loan write-offs, as long as the Scottish system has “broadly comparable costs” to arrangements in England.

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Kate Ogden, a Senior Research Economist at the IFS for Fiscal Studies and an author of the report, said: “Next academic year, Scottish students will be able to borrow much more to help with their living costs while they study.

"But the Scottish Government has made cuts to spending on undergraduate teaching in the 2024–25 Budget. This will reduce further the per-student resources universities receive and also mean fewer places for new Scottish students.

“Given the challenging financial position the Scottish Government faces, it is important to recognise that the Scottish Government’s commitment to free tuition comes with trade-offs.

”The Scottish Government spends around £28,700 more per student than it would if it were to adopt English arrangements for higher education funding and keep its four-year degrees.

”It is worth noting that around £4,900 of that spending benefits UK taxpayers, instead of Scottish graduates, through reducing UK government loan write-offs.’ Mary Senior, Scotland official at the Universities and College Union (UCU), said: “Students’ ability to study at university should be based on their ability to learn, not their ability to pay fees.

“Free university tuition is a policy supported by all the political parties, by students and the wider electorate.

“For free tuition to work, it needs to be properly funded. UCU has long argued for increased funding for higher education in Scotland and that the cost of teaching in universities is fully met by the Scottish Government.

“Ministers are happy to take the credit for a popular policy, but their failure to pay the bills can’t be sustained.

“Cuts of a fifth over the past decade to university funding mean it’s now time to reverse the underfunding and invest properly in universities and students’ education.”

A spokesperson for the Scottish Funding Council said: “The funding environment is extremely challenging.

"The Scottish Funding Council is currently considering funding allocations for individual institutions for academic year 2024-25.

"This is a complex process with a number of funding streams in the mix.

"Our aim will be to maximise investment in learning and teaching and protect opportunities for Scottish domiciled students, working within the overall budget envelope agreed by the Scottish Government.”