Is it worth going to University?

For quite a while I’ve been planning to write a post on this subject and then as luck would have it I was sent this guest blog by Sarah Willis, Freelance Finance and Business Writer!

 

University keeps getting more expensive. Some estimates put the cost at around £43,500, while the NUS says the average year at a university outside London costs £22,189 (making a total of £66,567 for a 3 year course).

With university applications hitting new highs every year, can a university degree really still be worth it?

How much does a graduate earn?

According to the ONS, graduates aged 21-30 have a lower unemployment rate than non-graduates, and “annual earnings for graduates reached a higher peak at a later age than the annual earnings for non-graduates.”

But how is the ‘graduate premium’? Spending £40,000-£60,000 on a degree for an extra hundred pounds a year, doesn’t sound like a very good return on investment. The government claims £200,000 is added to a male graduate’s salary over their lifetime, while other estimates put it at around £115,000.

Naturally, there is a huge variation according to subject – for example, medicine and engineering graduates earn considerably more than arts graduates – on average, more than twice as much annually.

Does a degree help you get a job? 

OK, so we know graduates do earn more, although the financial benefit of an English degree is arguably marginal. But with the proportion of graduates in the UK population increasing from 17% in 1992 to 38% in 2012 – is a degree more necessary than ever to get a job?

It’s starting to look that way. In April to June 2013, the ONS found the employment rate of graduates to be 87%, those with A-levels 83% and those with GCSEs 76%. Those aren’t enormous differentials, but as the percentage of graduates continues to increase, it’s very likely that although a degree won’t necessarily help you get a job –not having one will harm your chances.

More significantly, the majority of graduates tend to work in high skilled jobs, whereas only around 10% of non-graduates do. This presumably correlates to higher job satisfaction (although not necessarily) which has its own value irrespective of financial reward; a crucial consideration in fields that arts graduates may want to enter – journalism, publishing, music – where it’s increasingly difficult to make a decent living, despite the high level of skill required.

What do students think?

Statistically then, the financial value of a degree isn’t clear-cut. But there is, and always has been, a case to be made that university is less about the career bump and at least as much about the experience, and the people you meet.

This is certainly borne out by a survey made by Student Money Saver in 2013 of then-current university students. “Although 58.4% felt their first year wasn’t worth the £9,000, most said they don’t regret it, or at least consider it a worthy investment. A conclusive 86.2% would enrol into university if they had to make the choice again.”

The prevailing theme in this survey, as elsewhere, is that since tuition fees went up students are far more concerned with getting value for money than previous generations. However, they are also just as attached to, and recognise the intangible value of the experience: “a fifth of comments mentioned the university ‘experience’ as part-justification for the cost.”

What about debt?

Of course, what current students can’t attest to is what it’s like to live with the debt afterwards. Although student loans are constructed on a progressive basis – you only start paying them back once you’re earning over £21,000 and then only at 9% of everything above that threshold, resulting in monthly payments of as little as £30 – the debt will last much longer than previous students have had to deal with, eating into graduates’ ability to put together a house deposit and pay the mortgage afterwards.

But as graduates are still likely to earn more than non-graduates, it’s a relative problem. Theoretically, graduates will still make more money than non-graduates, but their total debt burden will be larger than previous generations who were fortunate enough to attend university. And that’s the message that emerges from the statistics – university still represents value for money, just less than it used to: diluted by market forces (there are more graduates) and a higher up-front cost.

Whether a degree still offers enough value depends on a number of factors. What course you do, which university you go to (Russell Group graduates tend to earn more than graduates from other universities) and how much value you place on the intangible benefits of the university experience. Many people, for example, meet their partner at university.

If the annual reports of record applications, and the positive responses from the Student Money Saver survey are anything to go by – the trade-off is still worth it. But there’s no denying the culture has changed. The value of university used to be barely questioned at all, now it’s an important issue to consider before applying, even if the majority still decide it is worth it.