The average graduate can expect to be around £100k better off over their lifetime for going to university – but a quarter can expect to be financially worse off

People who took their GCSEs in 2002 and went to university will earn around 40% more over their lifetimes (£320,000 in today’s prices) than their non-graduate peers for whom university was a realistic option. Differences in graduates’ characteristics and school grades relative to their non-graduate peers explain around half of these gaps. We therefore estimate those who went to university will earn around 20% (£180,000) more on average over their lives because of their degree. 

The overall benefit of these higher lifetime earnings will be split between individuals (in the form of higher take-home pay) and the exchequer (through higher tax revenues, less any spending on teaching grants and student loan write-offs). Under today’s tax and student loan policies, we estimate 43% of the total return would accrue to the exchequer on average. This means that the average graduate would be around £100,000 better off over their working life than if they hadn’t gone to university. 

These are among the findings of new IFS research, commissioned by the Department for Education. The report also finds that:

• There are big differences in estimated lifetime returns across people. While there are significant financial benefits to undergraduate degrees on average, a quarter of graduates can expect to be financially worse off over their lifetime as a result of going to university. One-in-ten graduate men could be more than £90,000 worse off than they otherwise would have been. 
• From the exchequer’s perspective, under the tax and student loan policies in place today, six-in-ten degrees would pay for themselves in the long run, with the government making a loss on four-in-ten. 
• There is large variation by subject: medicine and economics offer the highest lifetime returns to individuals and the exchequer, with the average graduate’s lifetime take-home pay over £400,000 higher than if they hadn’t attended university. But the average student enrolling in programmes such as creative arts or philosophy can expect to be worse off financially – by around £60,000 in the case of performing arts graduates. All of these figures are averages, meaning that some students taking low-return courses will still end up better off (and some of those in high-return programmes will benefit by substantially less than the average). 
• The returns to degrees are lower, but still positive, for students who went to university with lower GCSE grades. Students who continued in education post-16 but who had relatively low GCSE grades (the equivalent of at least five C grades but no better than four C grades and four B grades in their top eight GCSEs) can expect their lifetime take-home pay to be £53,000 higher on average than that of peers with similar grades who did not attend university. But among graduate men with low prior attainment, around four-in-ten can expect to be worse off financially over their lifetimes than if they hadn’t gone to university. 
• The overall boost to pre-tax earnings looks remarkably similar for the 12 cohorts who took their GCSEs between 2002 and 2013 (the latest cohort for which we can examine earnings up to age 26). The stability of the earnings returns, at least for the cohorts we can measure, suggests estimates based on students who went to university 20 years ago are still one piece of useful information for potential students today.

Natan Ornadel, a Research Economist at IFS and an author of the report, said: 

‘While money certainly is not the whole story, our latest estimates suggest that university pays off (financially) for most of those who go. This is true even when we account for the costs of doing a degree, and the extra taxes graduates are likely to pay over their lifetimes. But this does not mean that everyone who goes to university will be financially better off as a result: we estimate around a quarter of graduates – and 40% of men with low prior attainment – end up worse off than they otherwise would have been.’

Kate Ogden, a Senior Research Economist at IFS and an author of the report, said:

‘It’s not possible to know for sure whether today’s students can expect the same financial returns to university as those who went a few decades ago. Significant changes on the horizon – such as from AI – could reshape the graduate labour market in ways that aren’t yet showing up in earnings data. But there have been big economic shocks in the past, including the 2008 financial crisis, and our estimates suggest that the financial pay-off to attending university nevertheless held up well. While today’s students face a lot of uncertainty, ultimately they will still have to make decisions about whether, what and where to study. Looking at the outcomes of students in the past is one important piece of evidence to help them make those decisions.’