One in four graduates are worse off because they went to university, government’s own report says
One in four graduates will be worse off financially during their lifetime for going to university, according to a major government report that will raise new questions about the value of some degrees.
Researchers from the Institute for Fiscal Studies (IFS) found that the majority benefited economically from higher education, but a quarter ultimately lost money when student loan repayments and taxes were taken into account.
For some, the losses are quite large; one in ten male graduates faces losses of more than £90,000, the report found.
The findings come at a time of growing debate about the value of college and rising levels of student debt.
Ministers in England were forced to cap interest rates on Plan 2 student loans earlier this year following an explosive debate over how much graduates are being forced to repay after the system was compared to the PPI scandal by a former education tsar.
Kate Ogden, senior research economist at the IFS and author of the report, said the research would help young people “make decisions about what, what and where to study”.
Skills minister Jacqui Smith said going to university could be transformational but warned “not all degrees are equal”.
“Aside from diversity by subject, too many franchised and low-quality courses offer little to young people – selling dreams and leaving students stranded… My message to those considering university: choose carefully. Don’t default into a degree.”
The IFS research, commissioned by the Department for Education, tracked students who took their GCSEs in 2002 and compared those who went to university with those for whom third-level education was a realistic option but who did not.
It has been revealed that those who go to university will earn around 40 per cent more over their lifetime, or around £320,000 in today’s prices.
But around half of this is explained by personal characteristics such as differences in their backgrounds and how well they did at school, leaving the estimated benefit of a degree at £180,000.
But most of these will be returned to the treasury through higher taxes and student loan repayments, leaving them with around £100,000 extra.
However, there are great differences depending on the subject. Those studying medicine or economics can expect to take home an average of £400,000 more than if they had not gone to university, while courses such as philosophy or creative arts provide low returns.
Emphasizing that the figures are average, the authors also found that a performing arts graduate could be around £60,000 worse off financially.
Overall, under current tax and student loan policies, six out of ten cases will pay for themselves in the long run, while the government will lose out on four out of ten cases.
Natan Ornadel, one of the authors, said: “While money is not the whole story, our latest estimates show that university reaps rewards (financially) for most of those who go. This is true even when we take into account the costs of obtaining a degree and the extra taxes graduates are likely to pay over the course of their lives. But this does not mean that everyone who goes to university will be better off financially: we estimate that around a quarter of graduates and 40 per cent of low-educated men who are successful – end up worse off than they would otherwise be.
Ms Ogden added: “It is not possible to know for sure whether today’s students can expect the same financial returns from university as those who went to university a few decades ago. Significant changes on the horizon – such as those arising from artificial intelligence – could reshape the job market for graduates in ways that are not yet visible in earnings data.”
“But there have been major economic shocks in the past, including the 2008 financial crisis, and our estimates show that the financial return of going to college is still good.”
