Almost one-third more students were forced to leave university last year, mostly through debt and hardship.
More than 40,000 students dropped out last year - 5 per cent of the student population. Of these 25,000 gave up despite having no difficulties with their academic work - a 30 per cent increase on the previous year.
According to a comprehensive study of UK universities by the Committee of Vice Chancellors and Principals (CVCP) financial pressures are to blame. At least one-third of universities run job clubs for their students and many employ undergraduates as cleaners or in the kitchens and libraries.
The CVCP has previously maintained that the drop-out rate has remained steady at 13 per cent. Yesterday it admitted that figure would almost certainly rise if the trend continues.
"Increasing financial pressures faced by some students may aggravate other difficulties. Although it is not possible to calculate precisely the importance of financial hardship in a decision to leave, feedback from the universities strongly suggests that it is responsible for much of the increase.''
Government access funds distributed to universities by the Department for Education to help hardship cases are failing thousands, the report says.
There were 58,000 awards made under the scheme in 1993-94 against 81,000 applications. pounds 17m was paid out but claims totalled twice that amount.
Next year undergraduates will receive a maximum means tested grant of pounds 1,885 to be topped up with a maximum loan of pounds 1,385. Loans must be paid back five years after graduating, unless income is less than 85 per cent of the average wage. Grants were frozen in 1990 when the Student Loan Company was set up. Since last year grants are being cut by 10 per cent each autumn for three years.
Publication of the report sparked new calls for reform of the student funding system.
The CVCP is calling for the Government to adopt the Australian model where graduates would pay a proportion of maintenance costs and fees through income tax or national insurance.
Dr Kenneth Edwards, chairman of the CVCP, said: "Students are reluctant to take out their full loan entitlement because they fear they will be unable to meet the repayments."
Jim Murphy of the National Union of Students said: "This proves what we have been saying for the last twelve months. Thousands of students are being failed by the system. At the very least access funds could be increased to stop more hardship cases from dropping out.''
Earl Russell, Professor of British History at King's College, London, called on the Government to increase student maintenance by pounds 1,000 a year.
He said many students were forced to work during term time. "I know of one girl who was exhausted before she even came to college because she was getting up at 5.30 every day to clean a dentist's surgery.Reuse content