photo: B a m s h a d
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
photo: paolo mà rgari
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.
photo: Thiru Murugan
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.
