According to the IFS, the average student in England borrows £45,000, accumulating interest charges of £5,800, leaving them with a debt of £50,800 by their time of graduation. This is clearly unsustainable, and public pressure is calling for reforms to the student loan system. However, students also need to think more carefully about taking on this debt in the first place.
HESA predict that, of those students beginning a first full-time degree, 15.4% will fail to obtain either a degree or other undergraduate qualification. That’s a projected 61,200 students who, having taken on student debt, will leave university without a qualification. Furthermore, of those who do graduate, many will work in a job that doesn’t require their degree – according to CIPD, 58.8% of graduates will find themselves in this position. All this implies that people are not fully considering the implications of their choice when they decide to go to university.
Many people, on finishing their A levels, feel that a degree is a necessary next step. Many schools focus solely on university applications during students’ final years, not considering other options open to students. If students can obtain sufficient grades, there seems to be no question about whether they should go to university. And yet, according to Aviva, 37% of graduates regret having done a degree.
This same point arises when looking at student debt repayments. The IFS estimate that some 70% of students will never pay back their student loan. Although some students will partially pay off loans, this leaves 45% of the value of loans unpaid – according to government estimates, by 2042, there will be £200bn of outstanding student loans. Already, outstanding debt on loans stands at £100.5bn. To some extent, the system is justified – it is designed to allow lower earning graduates to escape exorbitant costs for their education, whilst higher earning graduates and the government subsidise this. However, currently, there are too many graduates who do not see the increased earning power expected from education, leading to unsustainable levels of outstanding debt for the government. Arguably, the benefits accruing from higher education for some graduates do not justify these costs to society of student debt.
So if the cost of university is so out of line with the returns, why do so many go?
There are a number of forces at work which channel students into university. The first is expectations. This is particularly potent for students from academic backgrounds – according to a Barclays survey, 96% of students whose parents attended university felt that they were expected to go to university; 80% felt their parents would be disappointed if they didn’t.
The second factor, not to be overlooked, is maturity levels. Many high school leavers are not ready to leave education – partially, the allure of ‘fresher’s week’ overrides reservation, but also, many do not yet feel equipped to enter the job market, continuing with education because they are not ready to decide on a career path.
The third factor is that school pupils are not properly encouraged to think of alternatives, and are instead channelled into higher education. Schools and external bodies should do more to inform students on other options available to them when leaving school. Not only would this encourage school leavers to take the path which best suits them, but it would also make university courses more competitive: if the course is not worth £9,000 a year, the student knows they can choose another option.
Finally, a lack of understanding about the costs of university, and a lack of liability to the individual, means that students do not properly consider the weight of the debt they are taking on. At age 18, a loan still feels like ‘free money’, and people do not consider whether the amount to be repaid justifies undertaking a degree. They blindly pay tuition fees because the money to do so is accessible, seemingly low risk, and to do so is the norm.
As a society, we are used to thinking of education as having positive externalities, but at the moment, these positive externalities are overcompensated for – higher education is overconsumed to the point that it is reducing the value of a degree in the job market, and imposing pressure on public sector finances. At the moment, students are not accountable for the costs if their education doesn’t pay off and so are overly liberal with their consumption, yielding unjustified pressure on the public purse as students take on heavy debts which are often not paid back. Asymmetric information also means that many students are overestimating the benefits of their education (or at least are uncertain of the returns), again leading to overconsumption of higher education. Too much of a good thing becomes a bad thing; at present, too many young people are naively going to university without being sure whether it will benefit them.
 It is not clear how this was calculated or whether this is a reliable figure.
 The Public Accounts Committee state that they believe the government consistently overstate the amount forecast to be repaid by about 8%.
 This survey considers only 1,000 students, and so is by no means definitive.