With bank loans drying up and a shortage of part-time jobs, more students are calling on the emergency grants, known as discretionary funds, to survive the economic downturn.
One university's hardship fund has run out twice during this academic year, with priority now being given to those who are showing better academic performance. The situation is compounded by the fact that students' parents – often the last resort in times of financial crisis – are themselves struggling to help as the downturn bites.
About 16 million was distributed by the Scottish Government in higher education discretionary funds for 2008-9 – an 8 per cent increase on 2007-8. But already this year, universities in real difficulty have gone back with demands totalling 882,500 to cope with urgent student appeals for help.
Claire Baker, Labour's higher education spokeswoman, said funds could be reallocated from universities' underspending, but that, across Scotland, hardship funds were being "stretched beyond breaking point".
She said: "The government has responded to university concerns, but demand for hardship funds is still outstripping supply. It is a worrying trend, and none of the universities is expecting it to stop any time soon.
"If student support levels were equal to what they are in England, that would be almost 2,000 more per student, and you would imagine there would be less demand for hardship funds."
Abertay University in Dundee has already seen its hardship fund run out twice this year, despite receiving extra cash from the Student Award Agency for Scotland (SAAS), which provides maintenance grants.
It ran out of money before Christmas and asked the SAAS for 40,000 extra. It received only 23,272 last month, and this has already been exhausted.
Abertay has had so many pleas for support that it is "means-testing" on an academic basis.
Professor Bernard King, its principal, said: "The university is withdrawing allocated funds to those students in poor academic standing to distribute to those in most need in good academic standing. The university believes additional funds will be required to assist those students who, mid-year, fall on hard times. If Scottish students were given the same amount (on a life-for-like basis] in grants and loans available to their English counterparts, the situation would be more manageable."
Napier University in Edinburgh is also experiencing a big increase in applications from desperate students, up 28 per cent compared with last year, and it predicts it will run out of money before the next discretionary funds are handed out.
Napier staff are advising students to try renegotiating debts, as they cannot help all those going to them for aid. Professor Joan Stringer, the principal, said: "It is becoming increasingly apparent that many of those fortunate enough to have a part-time job are having their hours or shifts significantly cut and many others are struggling to find any part-time work.
"We are also finding many students' parents are no longer able to provide the level of help previously afforded, due to, for example, loss of their own employment, less work available to the self-employed and loss of income from savings.
"In order to most efficiently manage the remaining discretionary funds, applicants are being advised, where possible, to negotiate suitable repayment plans for any outstanding bills, particularly utility bills, and to rearrange any existing debt or loan repayments."
"We do not expect we will have sufficient funds to support applicants to the level that many of them will need, and it is very unlikely we will have sufficient funds left to support students during the summer vacation period."
Elsewhere, Glasgow Caledonian University has seen a 45 per cent rise in the amount given to students in financial difficulty this year.
Queen Margaret University in Edinburgh said three of the 227 students seeking financial aid this year did so because their parents' businesses had failed, while six others had left the university altogether.
Gurjit Singh, the president of NUS Scotland, is demanding an overhaul of the "unfair" student support system and wants a 7,000 guaranteed annual income for every student through loans and grants.
"Student financial hardship has reached a critical level," he said. "Students are not being able to find part-time work as well, or access commercial debt. If our students had the right level of support in the first place, they would not have to apply to hardship funds."
A spokeswoman for the Scottish Government said: "We recognise that the current student support system was inadequately funded by previous administrations. That is why we have provided 38 million to introduce grants for 20,000 part-time students and why we are consulting on proposals to improve the student system more generally."
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Discretionary system that leaves Scotland at a disadvantage
UNIVERSITY hardship funds, also known as discretionary funds, are not intended to provide the main form of support for students following higher education courses in colleges and universities. They are supplementary to loans and other maintenance grants.
Nor are they intended to meet every financial demand from every student. The hardship funds contain a limited pot of money allocated by the Students Award Agency for Scotland and are intended to provide institutions with a source of additional funding, which colleges and universities can then use to assist students in financial difficulty and who are at risk of not completing their courses.
Each institution allocates funds based on their own individual criteria, and each offers varying amounts.
Abertay, before its pot ran out, had so many deserving applicants it was forced to choose those with a good academic record over those with a poor one.
The Dundee-based university chose to give amounts of about 700, as staff felt that was necessary to make enough of a difference.
Student groups believe that, despite the additional support, Scotland is at a disadvantage to England. Gurjit Singh, the NUS Scotland president, has demanded an overhaul to the "unfair" student support system and asked for a 7,000 guaranteed annual income for every student through loans and grants.
Critics claim the poorest Scottish students receive nearly 1,700 less than the poorest English students.
Case study: My 15,000 student debt is going to hang over me for years … it's a nightmare
ABERTAY student Nicola Young didn't even bother applying for help to her university hardship fund because she knew the pot was empty.
She said: "Everybody was talking about how it had run out because record numbers of students were applying."
The 21-year-old from Perth is 10,000 in debt at the moment and expects to graduate next year with a degree in criminology and debt of around 15,000.
She also has a 1,500 overdraft, which may well rise as she goes into her final year.
Miss Young works every weekend and several week nights in a cinema.
As she has two younger brothers still living at home, her parents are unable to give her much financial help.
"I need a minimum 20 hours' work to get by, so I work every weekend and some nights. That's my social life gone.
"If I get a couple of spare hours I just want to sleep.
"I didn't get any extra support, as the government says my parents should be able to help, but my two brothers are still living at home.
"It's a nightmare – my first year's wages, before taking into account any living costs, will just disappear on repaying my student loan.
"It's going to hang over me for years."