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5th March 2020

University makes one in five students financially worse off in the long run, study says

The report said that the creative arts, in particular, showed a low financial return for graduates
University makes one in five students financially worse off in the long run, study says
The University of Manchester. Photo: Wikimedia Commons

A recently published study has found that many university graduates in the UK would have been financially better off if they had not attended university.

Based on annual incomes, the report recently published by the Institute for Fiscal Studies (IFS) studied graduates from the mid-nineties onwards and found that 20% of graduates from UK universities earn less than those who did not attend.

The study showed that differences in earnings were also affected by the course studies with creative arts showing a lower level of financial return than other degrees.

The report comes at a time when the government in England is considering “restricting” the number of “low value” courses offered by UK universities. Commenting on the report, Universities minister, Michelle Donelan, was quick to praise the high quality of UK universities, saying “It is no surprise our universities attract students from all over the world”.

She added: “However, that prestige is built on quality and my role is to work with the regulator to safeguard that, while ensuring students and the taxpayer are getting the value they would expect for their investment”.

The report also revealed the monetary returns seen by the government through university attendance, giving an insight into the continued financial viability of student loans. Although high levels of tax paid by graduates brought in significant levels of income for the chancellor, Ben Waltmann, IFS economist and co-author of the report, claimed that “the government makes an overall loss on financing the degrees of nearly half of all graduates”, adding that certain subjects, the creative arts, in particular, are less financially lucrative for the government than others.

The report provoked several responses with regard to the benefits of higher education and the extent to which the report’s focus on finances ignored these. Jo Grady, the general secretary of the University and College Union said: “It is vital to recognise that education is about much more than just financial benefit. Focusing on future income following university ignores the wider benefits that education brings to individuals and to society.” Michelle Donelan also added in her response to the report that universities were crucial in providing “unquantifiable experiences and friendships.”

The report also showed the existence of a gender earnings gap between graduates, with men being likely to earn more in their lifetime than women on similar courses.  The data showed that the top 10% of men studying economics or medicine earned on average £500,000 more than their peers, while the top 10% of women on the same course had average gains of £250,000.  The report also showed that men were far more likely to see greater growths in earnings during their thirties in comparison to women.

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