Is a university education still a worthwhile investment?
Students in England are going to graduate with average debts of £50,800, after interest rates were raised on student loans to 6.1%, according to an Institute for Fiscal Studies report conducted in 2017. I suspect the figure has since risen to an estimated £55,000-£60,000.
I tell young people today that when I was 18 there was no such thing as tuition fees to pay. In fact, University education was totally free. Most students even received student grants for living expenses. Typically, that would be about £2,000 a year from my recollection. Heady days indeed. It is certainly hard to imagine that now.
Of course, in the seventies very few people actually went to university. Only about 8% of sixth-formers went on to study at university. Now the figure is more like 50%. I would venture to contend that a University degree is not as valuable as it once was. In my opinion it has become devalued because too many young people have a degree these days.
It is still the case that on average someone with a degree will earn more than someone without one. Pay for a graduate is still on average 20% higher than for a non-graduate. However, things are beginning to change.
There are far more apprenticeships available these days. More A level students are beginning to question the value of a degree. The Student Loan Company has been sold so the loan repayments have increased substantially.
A debt of £50,000-£60,000 is still a lot of money to owe. University student wannabes are seriously wondering is there a better way to get on in life. The good news is that there is a better way.
A few years ago Virgin created a company called Virgin Start Up. They offer start up business loans.
A Start Up Loan is a personal loan for entrepreneurs looking to start or scale their business:
- Borrow between £500 to £25,000 per co-founder – average loan size £10,000.
- Borrow over 1-5 years at a fixed rate of 6% p.a.
- No set up fee or early repayment penalties.
Every funded entrepreneur receives twelve months of exclusive support as part of The Funded Club. Including;
- Expert guidance to help you start and scale your business.
- A dedicated business advice helpline.
- Regular opportunities to meet with specialist mentors.
- An experienced mentor who’ll work with your business for six months.
Richard Branson came up with this brain wave because he started to question the
value of a degree himself. He is someone who of course didn’t go to university, yet he has still made a massive success of his life. A university education isn’t right for everyone. The world is littered with high successful people who either didn’t go to university or dropped out of it including the likes of Mark Zuckerberg of Facebook, Bill Gates of Microsoft and Steve Jobs of Apple.
So before taking the plunge and going to university consider the alternatives such as apprenticeships, professional trainee positions, entrepreneurship etc. If, having considered these alternatives, you are still hell-bent on a university education then why not consider a cheaper alternative? For example, the University of Buckingham offers a 2 year degree which should save the average student about a third of the cost of a 3 year degree. How about an Open University degree? You could have a full-time job and study in your spare time. Or why not go to university locally and live at home? All 3 of these alternative university options would reduce the cost of attending university so they are at least worth considering.
So, whatever you decide to do once you have completed your school education do consider all of your options because a university education is no longer the golden gateway to a prosperous future. Employers are increasingly looking for young employees with life skills such as inter-personal skills, teamwork, friendliness, initiative, leadership skills and above all else a great attitude. In a world where there are too many graduates, the ones with the superior life-skills are the employees who will progress the most.
So, whether you are a school leaver, a parent or a grand-parent do think about and discuss all of the options and do take into account the increasingly onerous debt you will be taking on to become a student before making your final decision.
Personally, I have never agreed with tuition fees nor student loans. It makes no sense to get your first 18 years of education for free and then make the most talented school students pay for their further education and get into debt. We should be supporting our most talented young people, not penalising them. As a financial planner the concept of educating yourself into debt doesn’t sit very comfortably with me.
So, if you would like advice as a student, parent or grandparent on university fees funding do contact us for further advice. You know it makes sense.