Sky high university fees: worth it for the salary boost?

Sky high university fees: worth it for the salary boost?

As the cost of going to university continues to grow – and experts warn student debt in the U.K. could hit a whopping £85,000 ($ 132,000) per head – new research brings some good news for budding students, revealing that a degree could boost lifetime earnings by over 50 percent.

After A-Level results (U.K. school-leaving exams) were published on Thursday, Professor Ian Walker from the University of Lancaster argued that cash spent on university fees was money well-spent, as holding a “good degree” has a serious impact on the size of your pay packet.

(Read more: Six college courses that help grads land jobs)

In research commissioned by the Department for Business Innovation and Skills, Walker found that holding a degree was especially lucrative for women. Over a lifetime, a woman’s earnings will be on average 53 percent – or £252,000 – higher if she completes a university degree. Men also benefit, seeing a 28 percent, or £168,000, boost to earnings.

The U.K.’s Universities Minister David Willetts said the research demonstrated what a “great long-term investment” university was.

“A degree remains one of the best pathways to achieving a good job and a rewarding career,” he said. “What is more, there is a real incentive for working hard, because the research finds that gaining a higher degree classification boosts earnings even further.”

(Read more: Generation gap: Ageism hurts Europe’s youth)

The research, which was published on Thursday, also found that high university attendance boosted returns to the government through higher tax revenues. State revenues increase by around £264,000 for each man, and £318,000 for each woman, that graduates, the report said, which was “far in excess of likely exchequer costs”.

Walker’s research will be welcomed by those preparing to attend university, as around 70 percent of students will end up with debts of between £65,000 and £85,000 when interest costs are factored in, investment firm Bestinvest said.

Bestinvest’s managing director, Jason Hollands, described this as a “sobering thought,” even in the context of a boost to lifetime earnings from gaining a degree. “In financial terms at least, the case for an ‘average degree’ may not be convincing,” he said.

Hollands said the key to funding a university education was to start as early as possible.

(Read more: Why more parents are choosing ‘one and done’)

“Based on an assumption of achieving an average return of 5 percent net of charges, each year you would need to invest £1,700 a year for 18 years to generate approximately £50,000. However, add in an inflation assumption of, say 3 percent, and the required sum is more like £2,900 per year,” he said.

“To illustrate the impact of delaying, If you only start accumulating a savings pot 10 years ahead of the date the funds are required (when the child is eight), then the annual sum to be saved will need to be around £5,100 per annum (based on the above return and inflation assumptions),” he added.

By CNBC’s Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave

Personal Finance


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