£100,000 – the real cost of going to university

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As a student currently embarking on a university degree, I’m looking forward to the freedom university will offer and meeting a whole bunch of new people from across the world. But one major worry is the finance: the cost of going to university.

Many people only look at tuition fees when they think about going to university. In the UK, university tuition is roughly £3,000 a year. For a 4 year masters degree course, this adds up to £12,000.

Tuition Fees: £12,000

 

But there’s the cost of accommodation, which is typically at least as large as the tuition costs. The cost of accommodation varies. In some of the larger cities, a room will typically cost £120/week. In some smaller town universities, £80/week might be closer to the norm. A 40-week let on university accommodation will set you back £4,000 a year. However, in later years of university, most students will live outside of university halls and this will be more expensive. Assuming an average accommodation cost of £4,500 per year, this adds up to £18,000 over a 4 year degree course.

Accommodation Cost: £18,000

 

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There is a much bigger cost which most people don’t even think about. Because studying at university and getting a full-time job are mutually exclusive options, by choosing to go to university you are actually saying “I will not be going to work” as well as “I will be going to university”. Economists call this the opportunity cost.

By choosing to study at university, you are foregoing 4 years of salary which you would have earnt otherwise. The typical starting salary for somebody leaving school with A-Levels but no university degree is £15,000 a year. By working, you’d potentially have earnt £60,000.

Opportunity Cost: £60,000

 

The other significant cost which needs to be considered is housing. Over the last few years, house prices in the UK have been rising by about 10% a year. What this means is that a house which will cost £100,000 today will cost £110,000 this time next year. Leaving university with £30,000 of debt and without £60,000 of salary means that university graduates must wait even longer before they can put together a deposit and get a foot on the housing ladder. On top of that, graduates may have to take out a larger mortgage on their first home because they cannot make a large upfront payment. Obviously, the appreciation in housing value depends on market conditions, but I think £10,000 is a reasonable ballpark estimate.

Housing Appreciation Cost: £10,000

 

So to sum it all up, when we take in all the costs of university:

£3,000 a year for tuition X 4 years = £12,000
£4,500 a year for accommodation X 4 years = £18,000
Direct Financial Costs: £30,000

£15,000 a year could have earnt in basic non-graduate job X 4 years = £60,000
Opportunity Cost: £60,000

House price rise in the additional time you must wait before buying = £10,000 (obviously this depends on whether house prices are rising)
Housing Appreciation Cost: £10,000

Total Cost of going to university: £100,000

It’s pretty depressing reading. University is a very, very expensive enterprise. It’s easy to see from these calculations why so many lower income families find it very difficult to send their children to university.

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But I think it also calls into question whether it’s worth going to university to study certain degrees. According to the government’s graduate prospects website, graduates in humanities earn £51,549 more in their lifetime and graduates in arts earn £34,949 more. Are the real costs of going to university greater than the benefits?

On average for all degree courses, those who graduate from university earn on average £160,000 more over their lifetime. This would still seem to indicate that going to university is good value for money. But the net benefit is probably less than people would think.

I really don’t want to put anybody off studying at university and I don’t think money should ever stop anybody from pursuing their dreams. But what is true is that going to university is an extremely expensive enterprise these days and students may be getting a bit of a raw deal.

6 thoughts on “£100,000 – the real cost of going to university

  1. Of course, through all of that you’re assuming that financial benefit is the only reason to go to University.

    Can you put a price on all the great experiences, opportunities and friends that University? Or quenching your desire for knowledge?

  2. Is the Government still aiming for 50% of people to go to university? (don’t forget the massive subsidy they pay to the university for your degree!) It’s hard to have that discussion without sounding like a science degree snob though.

    I only graduated last year (from a 4 year course). I paid £42pw when I was in halls in Manchester, how things change!

  3. Hi 🙂 Thanks for your comments!

    I think the government subsidises course placements by around £4,000 to £5,000 a year. After adding £3,000 from student fees, that still leads universities often a few thousand short to teach some degrees (architecture costs £10,000 a year to teach). I learnt when I visited the London School of Economics, there has been talk about increasing the fees further making it even more expensive to go to university!

    £42pw would be lovely! I’m not sure how much Manchester costs these days (I’ll check with one of my friends going there) but a single room uncatered in London costs about £100-£120pw. One of the leading London universities charges up to £180pw for single ensuite rooms! I’m guessing Manchester would be slightly cheaper than London but as both are large metropolitian areas, the difference probably won’t be huge!

  4. I was in Manchester halls last year it cost £65 per week. Better accommodation did cost £90-100 a week.
    I find articles like this one that sum up generally the whole countries graduates are inaccurate. A student who goes to Oxford Uni will earn far greater than one who goes to Bolton Uni for example. These uni’s are at opposite ends of the league table. This is why students should base this on individual factors rather than generalised articles.

    I also do not think you can put a price upon the experience of university which is described by many as the time of your life. I would prefer to have the time of my life rather than dismiss it to have a better economic future.

    I am from a low income family but receive generous government grants and university bursaries, I have had no financial problems and lead a full social life (going to clubs, paint balling, eating out, going on weekends overseas etc). The one thing I have realised from attending university is that money can’t buy good times, as I am the poorest I have been in my life due to no parental help, but having the best time of my life.

  5. doin my research no the net,stumbled upon this article.jeez you really have nothing to do but create “imaginary” costs.I am an international student and I must pay £12,000 fees per annum for a simple undergraduate course.

    i must subsidise what like 2 dozen english students,makes me cringe.Then again hopefully as I have big ambitions 100k will be pocket money for me.:p

  6. Dont think I entirely agree with your maths here. If your factoring in the £60k that you didnt make because you were at university, by the same logic you cant really say that it cost £18k for accommodation, because you have to live somewhere, whether near uni or near work. Im sure living near uni is more expensive than where ever it is you would have lived other wise, but the cost over the 4 years is probably more like £3k-4k.

    Also the housing appreciation cost would vary hugely. If your degree enables you to get a job with considerably better pay then you could quite possibly get on the property ladder sooner than if you had been working your £15k a year job, even though that would have given you a 4 year head start. In this case going to uni would be saving you money on this topic. However, I do like that you factored this in at all because it is a facto that is often over looked.

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