The financial return on investment of a degree

The average student from a low-income background will borrow £53,000 to attend a three-year degree at university, which rises to £28240.75 with interest if left unpaid over 30 years. The first £27,750 covers tuition fees, with the rest used for maintenance costs, including rent, food, and socialising, with four-fifths of students living away from home to study.

The graduate or professional premium is a term used to describe the increase in average wages that university graduates can expect having achieved a degree.

Students are told that going to university is an investment. The UK Government has claimed a graduate premium of an additional £400,000 of income over a lifetime. 1999 Age-earnings reported The Economic Journal showed the premium at an average of £410,000, the premium has reduced to just £100,000.

Over a 45 year working life, £100,000 is just £2,222 per year before income tax and national insurance. This increase in earnings does not cover the interest accruing on the loan. According to the Institute of Fiscal Studies, 20% of students would have been earning more ten years after graduating if they had skipped university and gone straight into work instead. 

It is important to note that the graduate premium is an average, and the return differs significantly by gender and subject area. According to the Institute of Economic Affairs, male Medical and Dentistry graduates earn an average of £400,000 more over their working lives than non-graduates. Male Creative Arts and Design graduates earn £10,000 less than non-graduates over their working lives.   

There are many reasons to go to university. Still, the financial return on your investment of delaying starting your career by three years and the £28k-£53k dept is only financially beneficial if you choose your degree specifically for that reason.