With the abolition of the maintenance grant for students from the poorest backgrounds (in favour of a loan system) and with tuition fees in England set to rise above £9,000 per year, getting a degree is an expensive business – especially for those from less well-off families. Many students can now expect to graduate with over £50,000 worth of debt, yet despite this thousands of young people are signing up to courses with the hope of securing a better future as a result. The notion being that a degree will lead to better prospects and higher earnings, allowing you to repay the debts you accrued at university. But how true is this theory, and has the cost of university finally outweighed the potential benefit?
Teachers, government ministers, and many young people believe that the career prospects opened up by getting a degree make the debts worthwhile, with Universities Minister, Jo Johnson declaring, a “need to ensure affordability is not a barrier to higher education,” noting that changes such as replacing maintenance grants with loans, ensure “higher education is funded in a fair and sustainable way.” Government policy-makers will point to record-breaking numbers of graduates going into work, as well as a purported £100,000 average lifetime graduate earnings premium, but this only tells part of the story.
While it is true that some graduates will go on to earn £100,000 more than their non-university-going peers over the course of a lifetime this only applies to a very select group of Oxbridge graduates. A report from the Intergenerational Foundation (IF) has declared that this earnings premium only really applies to those with medicine and dentistry degrees, saying that ministers should be “challenged for gross mis-selling” of university prospects.
IF co-founder, Angus Hanton argues that in most cases any extra earnings afforded by a university degree are wiped out by the levels of debt associated with studying for one. He explained, “Our research proves the current £100,000 graduate earnings premium so often touted equates to an ‘annual bonus’ of just £2,222 over 45 years of work, and is wiped out once National Insurance and Income Tax are taken into account. Furthermore, the premium is simply not enough to cover the interest accruing on the average loan.” He went on, “The current system is fuelling a self-perpetuating debt-generating machine which short-changes young people.”
The fact is, while many graduates are finding employment, their wages are simply not high enough to repay the debts they have built up at university, and the situation only looks set to get worse with increasing fees and the end of the maintenance grant. This is particularly concerning for those students from the poorest backgrounds as they will, in effect, be hardest hit and have to take out more debt than their better-off peers. So, have young people been mis-sold a university dream?
The increase in fees and the removal of maintenance grants for the poorest students all seems counter-intuitive to the government stated aim of increasing social mobility and getting more disadvantaged young people into higher education. If anything, these moves will only serve to make people more cautious about going to university – especially the more debt-averse sections of society.
Universities definitely need funding of course, but even here there have been questions about where the money spent on tuition fees is going. 80% of students say that they expected more from their university courses, with many wondering exactly what they were getting in return for the thousands of pound paid out in tuition. The answer may even be found in the coffers of some institutions.
While students face years of debts that they may never repay, the IF report showed that heads of 25 higher education institutions have managed to gain a 50% rise in pay and perks over the last two years, while 33 of them now earn more than £300,000 per year.
With such high wages being paid, at least in part, by student debts, is it any wonder that so many university bosses are quite happy to continue espousing the great earning potential afforded by a university education?
However, it seems that the real earning potential of graduates is only being felt by a minority of graduates and the university bosses themselves. Perhaps it is time for many more young people to revise their view on university – as even the most academic students may be better off looking for alternative routes, including apprenticeships.