Fifth of graduates ‘make net financial loss’ from university

Analysis of lifetime returns of English undergraduate degrees finds wide variation across subjects

February 29, 2020
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One in five graduates in England would have been better off financially had they not gone to university, while nearly half will receive a net government subsidy for their degree, new research suggests.

A study from the Institute for Fiscal Studies (IFS), commissioned by the Department for Education, estimated that the average net lifetime return of an undergraduate degree is £130,000 for men and £100,000 for women, when taking into account taxes, student loan repayments and foregone earnings during study. For both men and women, this represents a gain in average net lifetime earnings of about 20 per cent. The 10 per cent of graduates with the highest returns gain approximately £500,000 on average.

However, it calculated that about one in five English students – or about 70,000 every year – makes a net financial loss from attending university.

Most of the variation is explained by the subject studied at university. Graduates who studied medicine and law, for example, achieve very high returns on average, while few of those studying creative arts gain financially from their degree. Several STEM courses, including biosciences, also offer low returns for women.

Men generally gain larger returns if they attended a Russell Group university, but women see little difference in average returns across institution types.

The study drew on the Longitudinal Education Outcomes (LEO) dataset and controlled for students’ prior attainment and family background when comparing those who undertook undergraduate degrees with those who did not. Previous IFS research has examined the impact of undergraduate degrees on earnings at age 29, but the new study uses newly linked additional LEO data on earlier cohorts to consider the impact of earnings over an individual’s whole working life.

The estimates are based on the earnings of individuals who were born in the mid-1980s and went to university in the mid-2000s, with the analysis simulating earnings and employment trajectories up until retirement age. The study did not take into account any non-financial benefits of higher education.

The report, The Impact of Undergraduate Degrees on Lifetime Earnings, also estimated the benefit of degrees to the taxpayer, taking into account the government cost of providing student loans and changes in tax payments.

The expected gain to the exchequer of an individual enrolling in an undergraduate course is about £110,000 per student for men and £30,000 per student for women – but these rewards are driven mainly by the highest-earning graduates. The government makes a loss on financing the degrees of around 40 per cent of male graduates and half of female graduates, according to the study.

Jack Britton, co-author of the report and an associate director at the IFS, said that the findings “raise questions about the value” of degrees for individuals and taxpayers, adding that it would be “a bit of a concern” if there were degrees that either party was not aware would probably result in a financial loss.

ellie.bothwell@timeshighereducation.com

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Reader's comments (5)

A glass that is 4/5 filled and you report it as 1/5 empty.... lol That tells pretty much indicates the ideological bias of the author.
Part of the answer could be for more good quality work based learning. But it needs to be respected by learners, their families and employers. Also, better measure of benefit to society rather than just life long financial.
Funnily enough, many people enter Higher Education for reasons other than a desire to make more money. As long as they are not left destitute, does it matter whether they make a "net financial loss"? I *chose* to study a creative arts degree (despite being eminently qualified to do a STEM degree had I wished) in the full knowledge that it was unlikely to prove especially lucrative, because I deemed my desire to be an artist-academic to be the paramount consideration. And as for the government losing money, does it matter? Higher Education is supposed to be a public good, with the rationale for tuition fees being to ensure that those who become rich from their studies are paying their fair share (i.e.: avoiding a situation where "the poor postman pays [through his taxes] for the wealthy banker's education"). So, the fact that the government is subsidising the education of many people shows that the system is *working* as should be.
In case people think this is another one of the "Arty Types" revolting; my degree is in Computing and my MSc in Technology Enhanced Learning. I would happily subsidise anyone who wanted to study an art related subject because Art, in all its forms, improves the world and develops the thinking, creative mind whereas "Science" and "Progress" has done a great deal toward destroying both. Regarding the "cost" of these endeavours as my much loved compatriot said, "A cynic is a man who knows the price of everything and the value of nothing."
It is a logical fallacy to state 'One in five graduates in England would have been better off financially had they not gone to university.' While creative arts graduates earn on average less than non-graduates, that simply does not mean that without a degree this particular group would inevitably have secured a higher income if they hadn't taken a degree; for some, and perhaps for many, of them money is simply not their primary motivation. They would more likely have been less well-trained artists, with diminished opportunities to develop a successful career in the creative arts industries.

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