The average English graduate can expect to be £100,000 better off than their peers who didn’t attend university, but a quarter will be worse off, with subject choice significantly influencing future earnings, according to major new research from the Institute for Fiscal Studies (IFS).

Using data from a cohort of students who took their GCSEs in 2002 and applying today’s tuition fee, student loan and tax policies, the IFS has calculated that graduates earn “substantially more” on average than non-graduates in their 30s.

At age 37, median earnings among women who attended university are 56 per cent higher than among women who did not, and among men they are 28 per cent higher.

The research institute estimated that today’s average graduate can expect to be about £100,000 (15 per cent) better off financially than a similar young person who did not go to university, even after accounting for extra income tax, employee national insurance contributions and student loan repayments.

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But the new research, commissioned by the Department for Education (DfE), shows that while there are significant benefits to undergraduate degrees on average, not everyone will be financially better off, with about 20 per cent of women and 30 per cent of men likely to experience a negative return. In response, ministers have announced a consultation will begin on whether to introduce minimum entry standards in the autumn, saying “too many franchised and poor-quality courses do not offer a good deal to young people”.

Estimated net lifetime returns vary significantly by subject, with medicine and economics offering the highest individual returns of over £400,000 on average. 

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In contrast, the IFS estimates low or negative returns for subjects including creative arts, philosophy and languages, although some who took these courses will still be better off than if they hadn’t gone to university. 

The IFS also found that the public financing of undergraduate degrees through the student loans system pays off in the long run. 

When student loan repayments, revenues from income tax and national insurance contributions are taken into account, the Exchequer can expect average returns of £48,000 for women and £107,000 for men who enrol in university. However, the government makes a loss on about 40 per cent of degrees. 

As the DfE considers introducing minimum entry standards for universities, the research also shows that students with lower prior attainment are likely to benefit from a degree, although less so than their peers who scored higher marks in school exams. Critics have argued that high earnings post-university are mostly explained by strong performance in earlier education, rather than attributable to their degree. 

The IFS found that, for students with at least the equivalent of five C grades at GCSE, women who go to university can expect to be about £72,000 better off financially and men around £36,000.

The institute estimated that individual returns would be negative for about 15 per cent of women and 40 per cent of men in this group. 

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It did not look at the prospects of those with lower grades, as the government reportedly considers blocking those without an English GCSE from accessing student loans. 

While the findings suggest that prospective students are likely to benefit from a university education, Kate Ogden, senior research economist at the IFS and an author of the report, warned that it is “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”.

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“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,” she said. “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.”

Reacting to the report’s findings, Sutton Trust CEO Nick Harrison said university remains the “most reliable route to upward mobility we have”. 

Amid the ongoing criticism of so-called low-value degrees, Harrison noted “there is a chronic shortage of high-quality alternatives”.

“Apprenticeships and technical pathways can offer great prospects for progression and success, but there are simply not enough of them available to be a viable alternative for lots of young people.”

Vivienne Stern, chief executive of Universities UK, said the report offered clear evidence that “a university degree still pays off in a big way for the large majority of people”.

“The graduate premium is holding up, despite growth in the minimum wage and the generally poor performance of the economy which has held back wage growth,” she added.

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Stern said that while not all benefit financially to the same extent, “it is worth pointing out that some of those graduates who earn lower salaries contribute a lot to society, including those who become artists and performers, whose choice may not have been motivated by money”.

helen.packer@timeshighereducation.com