Is going to university worth the money?

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Going to university is a major investment, the question whether it’s a lucrative one that brings you a high-flying job and a higher income, or a dud that leaves you with a mountain of debt in a role you could have done without the study.

In the last financial year, the average student debt that had been built up before repayments started hit an eye-watering £44,950 in England, and the average annual loan repayment hit £1,000.

Meanwhile, the repayment threshold was frozen, so more people started repayments earlier, and the rise in retail price index (RPI) – which underpins interest on these loans – meant another £8.3bn was added in interest alone.

Graduates will hope it’s worth the money, because they’ll end up being paid more, so over time they’ll be better off as a result of studying. The average figures certainty support this.

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In 2020/21, the average graduate made £28,800 a year five years after graduation. This puts them around £3,000 a year better off than average at this age – and over time, graduates on professional pathways can expect to see the gap grow.

However, the average hides a huge amount of variation. An awful lot depends on the subject you study. The highest average salaries were commanded by those studying medicine at £52,900, followed by economists at £40,900, pharmacologists at £37,600 and engineers at £36,100.

Meanwhile, those studying the performing arts made an average of just £21,200 five years after graduation.

A previous study by the IFS found that women who studied creative arts and languages earned the same amount during their lives as they would have if they hadn’t gone to university, while men who studied creative arts actually earned less than non-graduates.

It’s not just about the subject though. The Department for Education also found that those from lower income backgrounds graduate into jobs with lower average salaries – with graduates who received free school meals earning an average of 10% less than those who didn’t.

Gender gap for university graduates

And women face a horrible gender pay gap right from the start – with female graduates making almost 12% less than men five years after graduation.

Part of it is that women are more likely to study subjects that lead into lower-paid industries, but that’s not the full story, because the IFS research found that women who studied economics or medicine earned an average of £250,000 more during their working lives than those who didn’t go to university, while men studying the same subjects earned £500,000 more.

This is likely to owe much to the fact that women are more likely to adapt their working lives to caring responsibilities which may mean career breaks or periods working part time.

And this is just those graduates who are able to find work. Five years after graduation, 87% were in sustained employment or were studying. Some of the remaining 13% will be graduates who have taken on caring responsibilities or are taking time out, but there will be plenty of people who took on a huge burden of student debt and are yet to reap the rewards of a graduate salary.

A young woman in a modern office space uses a laptop at a desk. Space for copy.
Female graduates make almost 12% less than men five years after graduation. Photo: Getty (Catherine Falls Commercial via Getty Images)

The balance will tip even more in favour of giving university a miss from September, because the way that student loans work will change. At the moment, the upside for graduates is that the vast majority of them won’t pay their debts off in full.

However, for students starting in September, the repayment threshold will drop from £27,295 to £25,000, which means even more graduates making payments earlier in their working life. And while the interest rate will be cut to match RPI, if inflation stays high, their initial interest rates are still horribly high.

The real blow, however, is that graduates will need to repay their loans for up to 40 years before the remainder is written off – instead of 30 years. This will massively increase the proportion who are expected to repay their loan and interest in full.

Read more: How to weather the looming debt crisis

It means the very highest earners will pay less – because they were always going to repay in full and as a result of the change they’ll pay less interest. However, the vast majority of graduates will repay more. For middle earners and those slightly below, the changes will leave them £19,000 worse off.

For some people, the maths still stacks up, and university is worth the investment. For others, the experience of going to university is worth the cost, regardless of whether it pays financially.

However, the sheer scale of the cost, and the fact you’re not guaranteed to make your money back, may well convince others of the attractions of alternative routes that won’t leave them with a mountain of debt when they emerge at the other end.

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