One in four graduates will be financially worse off over their lifetime because they went to university, according to a major government-commissioned report that will raise fresh questions over the value of some degrees.
Researchers from the Institute for Fiscal Studies (IFS) found that while most benefit economically from higher education, a quarter ultimately lose money once student loan repayments and taxes are taken into account.
For some, the losses are substantial – one in ten male graduates face losing out by more than £90,000, according to the report.
The findings come amid growing debate over the value of university and rising levels of student debt.
Ministers were forced to cap interest rates on Plan 2 student loans in England earlier this year, following an explosive row over how much graduates are being forced to pay back, after the system was compared to the PPI scandal by a former education tsar.
Kate Ogden, a senior research economist at the IFS and an author of the report, said the research would help young people “make decisions about whether, what and where to study”.
Skills minister Jacqui Smith said going to university could be transformational, but warned “not all degrees are equal”.
“As well as the variation by subject, too many franchised and poor-quality courses do not offer a good deal to young people – selling the dream then leaving students in the lurch… my message to those thinking about university: choose carefully. Don’t walk into a degree by default.”
The IFS research, commissioned by the Department for Education, followed pupils 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 did not attend.
It found those who went to university will earn around 40 per cent more over their lifetimes, or around £320,000 in today’s prices.
But around half of that 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.
Much of that will be returned to the exchequer through higher taxes and student loan repayments, however, leaving them with around an extra £100,000.
However, there is large variation by subject. Those who study medicine or economics can expect to on average take home over £400,000 more than if they hadn’t attended university, while courses such as philosophy or the creative arts offer poor returns.
The authors, who stress the figures are all averages, also found a performing arts graduate can expect to be worse off financially by around £60,000.
Overall, under the current tax and student loan policies, six in ten degrees would pay for themselves in the long run, with the government making a loss on four in ten.
Natan Ornadel, one of the authors, said:”While money certainly is not the whole story, our latest estimates suggest that university pays off (financially) for most of those who go. This is true even when we account for the costs of doing a degree, and the extra taxes graduates are likely to pay over their lifetimes. But this does not mean that everyone who goes to university will be financially better off as a result: we estimate around a quarter of graduates – and 40 per cent of men with low prior attainment – end up worse off than they otherwise would have been.”
Ms Ogden added: “It’s not possible to know for sure whether today’s students can expect the same financial returns to university as those who went a few decades ago. Significant changes on the horizon – such as from AI – could reshape the graduate labour market in ways that aren’t yet showing up in earnings data.
“But there have been big economic shocks in the past, including the 2008 financial crisis, and our estimates suggest that the financial pay-off to attending university nevertheless held up well.”
