The so-called bedroom tax is contributing to "significant hardship" among low-income families, with parents cutting back on food, heating and other essentials, according to a new study.
Experts at the University of Manchester said they had carried out the first research to examine the impact of the controversial welfare policy on children and their education.
The removal of the spare room subsidy, commonly known as the bedroom tax, had left parents feeling "embarrassment at being financially poor" after reducing housing benefit payments by an average of £572 a year from those deemed to have one spare bedroom, they said.
But the Department for Work and Pensions (DWP) branded the study, which involved interviews with 14 parents and 40 representatives from schools, housing associations and community groups, as "unrepresentative" and said its findings were "misleading".
According to the report, published by the Manchester Institute of Education, parents affected by the so-called bedroom tax spoke of feeling "increased stress, anxiety and a sense of being socially isolated".
Teachers also reported that teenagers who were forced to share bedrooms with much younger siblings as a result of the changes were suffering at school because of a lack of quiet space to do homework, the study found.
It said: "Some parents reported eating less, or even going without themselves to ensure their children had food on the table.
"Some schools reported parents as increasingly unable to afford school uniforms, coats and shoes. School staff and some parents also described how children were emotionally affected by the financial and psychological effects of poverty."
The report concluded: "Although exploratory, the study confirmed a wider picture emerging from research that the 'bedroom tax' is failing to meet its original aims while contributing to significant hardship among low-income families.
"It suggests that it may also be working contrary to other policies intended to support child well-being and educational achievement, diminishing their effectiveness.
"An obvious conclusion is that the Government should review its policy. Doing so would show a greater commitment to supporting children, helping parents to maintain their responsibilities, reinforcing communities, tackling educational inequalities and ensuring that the effects of austerity do not fall disproportionately on poor families."
The "bedroom tax" was introduced by the Conservative-Liberal Democrat coalition government in 2013.
It removes up to a quarter of housing benefit from working-age people renting from councils or housing associations, if they are deemed to have more bedrooms than they need.
A DWP spokesman said: " This is a small, unrepresentative study and it is misleading to generalise from such a tiny sample.
"It is wrong that under the previous system taxpayers had to subsidise benefit claimants to live in houses that are larger than they require. Removing the spare room subsidy has restored fairness to the system and ensures people on benefits make the same choices as everyone else."