£45k of debt and an uncertain future – is university still worth it?
With interest rates ramping up and many degrees proving poor value for money, more young people are choosing apprenticeships or workplace training instead. Boudicca Fox-Leonard spoke to some of them
Twenty-year-old Jack Pinchin has just had a pay rise, taking his salary up to £24,000 a year. Meanwhile his friend, who is studying for an accounting degree at Birmingham University, has no spare cash at all and, after all the fun of first year, is now in second-year exam-stress hell. “I think he regrets not doing what I’ve done,” says Pinchin.
That’s because four years from now they are both likely to have the same ACA chartered accountancy qualifications. The difference will be that while his friend will have a degree and all the student debt that goes with it, Pinchin will have been earning the whole time as an apprentice at an accountancy firm.
When he started at Mercer & Hole in September 2020 as an audit apprentice, Pinchin found it a shock to go straight from school into an office. But he doesn’t envy his university friends. “I feel that a few of my friends are trying to extend their youth a bit by delaying going to work,” he says. “Many of them aren’t that interested in their subjects.”
Freshers’ week fun has long been part of the attraction of university, especially for young people who are undecided about what to do with the rest of their life.
But the average student now leaves university with debt of £45,000, which is a lot to pay for the memory of a busy social life and a lack of adult responsibilities.
University remains the surest route to upward mobility
And with inflation soaring, the interest rates that students and graduates pay on their debts go up as high as 12 per cent from September, according to analysis by the Institute for Fiscal Studies. The increase will hit those who earn the most the hardest; those earning £49,130 or more will see the interest on their debt increase from current rates of 4.5 per cent to 12 per cent.
These startling increases have led the Government to fix the rate at a lower level for students who will be beginning their degree courses from next year.
But in the meantime, sixth formers will be wondering if it makes any sense to start this September or rather defer until the rate is fixed. Many might also be wondering if it’s worth going to university at all.
More than 50 per cent of young British adults now go to university, compared with 15 per cent in 1980 – despite the fact that in 1980 (and up to 1998) tuition at English universities was free of charge.
Two decades on from the introduction of tuition fees, set by Tony Blair’s Labour government at £1,000 a year, public universities in England charge up to £9,250 a year. Accommodation and living costs, together with a lack of time, energy and opportunity for alternative employment while studying, add up to an average graduation debt level of £45,000.
Is it worth it? In mathematical terms that even an arts graduate could understand, the answer would appear to be yes.
Graduates are reassured that they will earn more on average than those who never went to university, typically taking home £35,000 a year, compared with £25,500 for those without a degree. Around 80 per cent of graduates see a positive financial return, averaging £100,000 to £130,000, over their lifetime.
There are other less immediately quantifiable benefits, for instance in social mobility. According to James Turner, chief executive of educational charity the Sutton Trust, university remains the surest route to upward mobility – and the highestranked universities remain the best bets for getting top-paid jobs.
Data from the Graduate Outcomes survey showed that 80 per cent of the 2018/19 cohort of graduates from Russell Group universities were in highly skilled employment 15 months after graduation compared with 67 per cent of those from other UK universities.
But at the opposite end of the spectrum, analysis of data from the Institute for Fiscal Studies (IFS) by Telegraph Money and wealth manager Hargreaves Lansdown in 2020, found Bolton University ranked at the bottom in terms of providing value for money. The average male graduate from Bolton University will be earning just under £22,000 by age 29 (£18,500 for female graduates), which is less than the average earnings of someone with no degree and fewer than 5 A*-C GCSEs at the same age.
Amid concerns about the quality of some degree courses, last month it was revealed that universities are to face Ofsted-style inspections for the first time. One particular worry is that virtual teaching has taken root during the Covid-19 pandemic. Several universities have faced student anger about an ongoing reliance on online and “blended” tuition, which some view as a convenient way to ratchet up student numbers without investing in additional infrastructure.
It’s not surprising that there appears to be increasing interest in alternatives to university. Employers complain of a widespread shortage of skilled staff, and everyone has an apocryphal story of the high earning power of some skilled tradespeople.
Access Training UK, which specialises in trade courses, has seen demand for its services explode, with a 29 per cent increase in applications since June 2021. The most popular professions that people are hoping to transition into are electricians, with a 38 per cent increase, closely followed by increases in trainee gas engineers (29 per cent) and plumbers (24 per cent).
Many of the UK’s most cutting-edge technology companies are also expanding their apprenticeship programmes, recruiting an increasing number of school-leavers alongside graduates. Young people are being offered the chance to become software engineers, accountants and bankers without following the traditional university-at-18 route.
The St Martin’s Group helps connect young people with employer-led apprenticeships at some of the UK’s largest companies, including Network Rail, IBM and BT. Meanwhile, the aerospace company BAE Systems is set to hire a record 900 apprentices across the UK in 2022.
This all makes sense, for the companies and young people, and for the economy as a whole. What is less easy to explain is why so many young people are still very keen to go to university.