/ Money

Is a degree worth £84,000 of debt?

Student protesters

Figures from the BBC show that some graduates could face total debts of up to £84,000 under the new student loans regime due to launch in 2012 – double what they originally borrowed. Is a degree worth this sort of debt?

When I first blogged about the new system of funding for higher education, I had a fantastic response. Many of you felt very strongly about the issue and passionately argued in favour of, or against, £9,000 tuition fees – but in the end, the government’s policy passed through Parliament and the new regime is set to come into force next year.

Yet, this hasn’t signalled an end to the controversy surrounding student funding, with many students and their supporters as angry as ever about the changes.

The system in short

This week, studies by the BBC added fuel to the fire by suggesting that graduates with above-average, but by no means exorbitant, earnings could face paying back up to £84,000 for their university education. So are these figures reliable? And if they are, will any degree be worth its hefty price tag?

Once the new student funding system comes into effect, graduates earning £21,000 and above will have to repay 9% of their earnings for up to 30 years. If their student debt is not repaid within this period, it will be written off.

However, the interest rates payable on student loans under the new system will vary from inflation-only to inflation-plus-3%. Those who earn more will pay higher rates of interest on their student debt.

Shocking student debt scenarios

The BBC tells a shocking story on its website, suggesting that under this system some graduates will ultimately pay back double what they borrowed to fund their time at uni.

It worked out what would happen to three students, all of whom borrowed a total of £39,000 – £9,000 in fees, plus £4,000 for living expenses over a three-year course. It was also assumed that all three would go on to earn more than the national average.

You can download a spreadsheet of the BBC’s calculations here, but I’ll summarise one of the examples: A student with an annual pay rise of £2,000 would repay £83,971 over 25 years.

The BBC’s numbers are certainly enough to send a chill up my spine – and they’ve outraged many parents, young people, politicians and financial experts. But David Willetts, the universities minister, said the BBC’s ‘examples’ were not typical: ‘Taking cash figures and looking 30 years ahead is a rather odd way of doing it’.

He also pointed out that the government had deliberately decided to ‘ease the burden’ on people in their 20s and 30s, meaning student loans would be repayable over longer periods than they are now, making the monthly repayments lower.

Other accountants have argued that when taking inflation into account, an £80,000 debt will not mean the same in 30 years’ time as it does now

A debt too far?

Given the fervent response to my last Conversation about student funding, I’m keen to know what you all think about these figures. Are they as scary as they seem, or are we reacting to them too emotionally?

For my part, all I can say is that when I woke up to hear this data being bandied about on Radio 4’s Today programme, my heart sank. Whatever spin you try to put on them, these numbers remain enormous. And for young people from less privileged homes, I still believe this will make a crucial difference to whether they feel able to embark upon degree courses.


It is a huge amount of debt for a young adult to take on. My concern is that it would normalise large debts to them.

Mark Raymond says:
18 March 2011

I left university around three years ago. I hate being in debt, and I intend to pay back my loan (meagre as it is at £6k). However, my little sis has the bank hounding her for credit card bills and overdraft repayments, and I can’t see this changing any time soon. If you’re used to being in debt from such a young age, and know that these sharks are willing to loan you money despite a poor income, then why not keep borrowing?

I don’t know. I think there are some people who don’t mind being in debt, and the banks have made it easier to do just that. Other people, like me, really dislike it. If I ever have children, I certainly won’t be one to suggest university education so quickly. From experience, there are better ways to spend your money and get edu-ma-cated.

I think it is the most retrograde step the appalling ConDems could have made – for ideological reasons not for real economical reasons. If we were really as “poor” as the Condems pretend – why is Smarmy Dave going for a Libyan No Fly Zone? .The future of the young and hence the country is at very high risk.

Frankly the middle to low income families will not countenance such a large debt – not to mention the impact it will make to any future borrowing for mortgages for the individual. So the two tier system is here at last (unless the Coalition is smashed) whereby the lower “classes” cannot afford to go to the £9000 a year Universities. A true divide by wealth not ability. Labour at least managed to get 50% of students through Uni – Now I feel we’re heading back to the 5% of “good old Tory Days”

This Government disgusts me. For the future of the country – Education should be free to all that can benefit from it – Just as the Welfare State was set up to encourage.

I am really glad I was born long enough ago to benefit throughout my life from the Welfare State Britain used to be so famous for..

I teach in a large university. In our first year we have some excellent students but there are many who put in very little effort. I would like university places given to students who can demonstrate motivation and have reasonable aptitude, and for these students given GRANTS so that they don’t need to work during their studies, except during the long vacation in the summer.

We are wasting huge amounts of money on students who have little interest in their studies. We have to dumb down teaching to avoid half the class failing. Some classes are huge and students don’t get to know their lecturers until the second or third years – they are little more than numbers.

When good students are taught alongside others with little motivation, the stimulating environment is lost, so their education is debased.

I am not opposed to graduates contributing to the cost of their education, but if university education is reserved for those with motivation and reasonable abiltiy the country can afford to support the deserving cases.

Dave Nicholls says:
19 March 2011

I’m very unhappy at the way these figures were put across. They are described as ‘cash figures’ without any real explanation as to what it means. Basically they show the total amount paid over the term of the loan (which is up to 30 years)

They do not take into account the fact that the payments you make in the future will be devalued by inflation. Paying £100 today is not the same as paying £100 in 20 years time. Using the 2% RPI the £100 paid in 20 years would be equivalent to about £67.30 today. To understand what the total figures mean you have to take this into account.

If you do these calculations the £78882 in the first example drops to under £53000 in todays terms. Still a large amount, but much more realistic.

A second issue with the BBC figures are the assumptions about salary rises. The figures highlight that an extra £1000, £2000, or £4000 are added each year, but fail to point out that this is on top of a 2% above RPI wage increase (as shown by the spreadsheet)

In other words the figures assume that the graduate will get above inflation rises plus an extra boost each and every year. Is this considered realistic?

I assume the BBC chose to do this because it helps inflate the total figures since higher earners get hit with extra interest on their loan over and above RPI.

Paul says:
24 March 2011

Before putting up tuition fees, I think we should examine the way many universities spend public money. For example, I read about universities offering enterprise grants, developing business parks, and in one case sponsoring a County Cricket team (by funding a £14million Pavillion). Academic institutions should stick to what they are paid to do – educating our young people.

What do you think about the aa42 “Fairness in Student Fees” proposal?

This would spread the load more fairly and would also help balance the govcernmenbt’s books more quickly.


It looks like most universities are going for the £9,000 fees according to this breakdown: http://www.bbc.co.uk/news/education-12880840 which is a bit depressing.

James Rex says:
12 May 2011

I am afraid the value of some degrees are of little worth both from the value/cost (student and tax payer) view and some of the subjects obtuse. The push to get graduate numbers as high as possible irrespective of need or ability has prostituted the value of too many awards.

To saddle some with uni costs and the expectation of getting a job easily just because they have a degree is not fair on these graduates who read subjects which do not really warrant a degree course.

Gap years can be fun and possibly worthwhile but graduates should have the intelligence to plan forward and forgo this long holiday and start to work and save and pay off debts. Long vac work can provide educational experience – and resposibility.