One of the most notable policies to come from the bouquet of manifestos put forward for the upcoming general election is Labour’s pledge to abolish tuition fees. They identify £57,000 as the figure for the average debt the poorest graduates are being left with. That’s a hefty debt figure for anyone to be carrying around, but it’s especially heavy if you’re entering the job market for the first time. Pledge to abolish the debt and you’re nobly taking that off the shoulders of burdened job-seeking grads but you’re bringing it into a strained public purse – to the tune of £8 billion a year, according to some estimates.
Either way, it’s clear that there’s no such thing as a free lunch when it comes to education. Given that, it’s worth having a look at some of the key financial variables. I understand it’s ugly to financially quantify the real ‘value’ of education but I believe if you’re basing billion-pound policies on it you would be remiss to not look at what it brings back to the country economically.
A recent breakdown of figures from Universities UK suggests a salary premium of £10,000 on graduates over non-graduates. Over a 40-year working career that’s an extra taxable £400,000 being drawn into the UK economy per graduate. If 777,000 individuals achieve a degree level education, as they did last year, then that is a total of an extra £310 billion taxable income being added to the UK economy between now and 2059. Add to that the £21.5 billion the sector contributed to our GDP last year (1.2% of the total) and you have a figure of £1.17 trillion being contributed by higher education to the UK economy over the next 40 years.
So, clearly, education pays. There are variables such as the debate over tuition fees but the fundamentals, if viewed through this basic economic lens, stack up. However, there is one existential threat: for the third year running, drop-out rates have increased in the UK. Earlier this year the education secretary asked universities to counter this as data revealed 8.8% of new students from disadvantaged backgrounds were dropping out before graduation. At some of the country’s lower ranking universities this rose to almost 1 in 5 students not matriculating.
This is the worst possible scenario for these individuals. Already disadvantaged by circumstance, they are giving up on the closest thing to a guarantee of better earning power, and then being laden with debt on top of that. If education is to be the great leveller our society so badly needs then rising drop out rates, especially among poorer students, are the nemesis we must tackle.
It’s worth seeing this in other contexts too. Predictably, we are not the only country dealing with these issues. Globally, the world is only going to get more competitive so to have your population underserved when it comes to the golden ticket of education is clearly not a good idea. Another angle is the loss of social cohesion and enfranchisement we risk if education only serves to exacerbate economic divides.
However, in the USA, where the gains from graduation are even more pronounced, they have come up with something predictably entrepreneurial to keep their students at university. Education Insurance Corporation (EIC) has created something called ‘American Dream Insurance’, which guarantees a graduate’s income after they graduate.
It’s a clear win-win for all parties. For universities: who will have a higher retention rate (in some parts of the US almost 80% of students don’t complete their studies). For students: who get a degree and who will avoid the double trap of leaving school unqualified but with debt. For the country as a whole: America receives an economic multiplier of more higher earners, brighter minds and social mobility.
It’s an elegant concept that recognises the value of education on all levels – so it would be a shame if this solution was not considered here, either by the universities themselves, or by our policy makers. After all, the numbers don’t lie: there’s no better investment to insure than education.