Should I go to university?

Should I go to university?

Woah, heavy question and fraught with variable answers based on your personal situation but this blog post will focus on whether going to university is a worthy investment.

Investing in a degree is investing in yourself and your future earnings potential. It’s clear that people with a degree can expect an earnings premium and are generally recruited to higher positions than those that do not. This premium has been calculated by Statisticians Jaison Abel and Richard Deitz to be around £240,000 over a lifetime.

For example, people with degrees earned an average of £12,000 a year more than non-graduates over the past decade. The mid-point salary of graduates aged 22 to 64 was £29,900, compared with £17,800 for non-degree holders. If you are a graduate and aren’t earning anywhere near that then learn how to get a pay rise.

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My personal circumstances

If I consider the cost of my education to be £12,000 (the size of my student debt pile excluding living expenses) and the opportunity cost of the three years that I spent at university where I could have been working to be £37,400 (£17,800 non-degree salary x 3 years minus living expenses). My graduate degree has cost £49,400 in total. If I earn £240,000 more due to my degree over my lifetime then that’s a 380% ROI or 10% per year over 40 years. That’s a fantastic rate of return!

Fees were just £3,290 when I started university and interest rates are BOE base rate plus 1% or 1.25% as of writing. I was pretty lucky.

What about today?

Would I have gone to university with today’s fees and interest rates? With fees at £9,250 and interest rates of Retail Price Index (RPI) + 3% (6% as of writing!) My gut feeling says no. But let’s run the numbers.

Debt pile: £27,750 (£9,250 x 3 years)

Opportunity cost: £40,400 (£18,800 non-degree salary in 2017 x 3 years minus living expenses).

Total cost: £68,150

ROI: 252%

That’s a 6.3% ROI per year over 40 years which isn’t bad but the stipulation comes with that spiky interest rate. Central bankers will target Consumer Price Inflation (CPI) to be around 2% per year. RPI will be similar if not slightly more. Historically RPI is about 1% above CPI so real ROI after interest repayments is 0.3% or rounded down to nothing. Don’t believe me? Here is a BBC article which says the same thing independantly.

So, I shouldn’t go to university, right?

Wrong, it’s not always all about money. My degree has allowed me to open doors to opportunities that I would never had access to and has allowed me to compound my wisdom exponentially. I have always had a natural acumen for business but studying it alongside a language expanded my mind in so many ways. The return on investment may be 0 but the return on your life will be immeasurable. It also focuses your mind on where you want to go and what you want to do.

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Life without a degree

Remember, if you are reading this then you probably aren’t the average non-degree person. You don’t have to earn £18,800 – your potential is limitless. Look at Bill Gates if you don’t believe me. If I hadn’t gone to university then I would have invested more time to self learning. I may have built some kind of business. That’s equally as exciting and leaves a lot of what if statements.

Personally, I’d say no to university at the current prices.

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