Martin Lewis changing tack on HE finance considerations

[shuggarushed]

Until recently, ML consistently encouraged all young people considering uni to not worry about finance on the grounds that if they didn't get a highly paid job then they would never have to pay back the debt/tax (he prefers to call it a tax). While true, that was an unaffordable reality for the taxpayer. Inevitably, the system was changed in 2023 and graduates of the new scheme are much more likely to pay back their debt/tax. Cue lots of discussion here on Mnet and elsewhere about whether the high cost of a degree is worth it and, now, ML is starting to weave this narrative into his journalism. Given his influence (i.e. most UK students and parents are familiar with his narratives on student finance), it'll be interesting to see what impact it has and how it evolves over coming years. For now, he's collecting stories, and treading carefully as it's obviously an emotive subject.

Example: His most recent podcast covers it in the last 10 minutes from about 1h:02m in the recording: https://www.bbc.co.uk/sounds/play/p0m92f0w

There seems to have been a bit of a shift in the last few years towards degrees (often STEM, e.g. Computer Science) with potentially higher salary prospects at the expense of some arts and humanities like modern languages.

There's no easy answer here IMHO. The whole university and student financing system is a mess. Lots of critics of the current university system blithely trot out that schoolkids should do apprenticeships instead but it is hard to see where tens or even hundreds of thousands of apprenticeships would be created to replace university courses.

With the current budget woes at many universities, it looks like a lot of courses may disappear in the next few years. University may look quite different in a few years time.

A change I think will happen is that degrees will become 2 years not 3.

Except that reports show STEM is not the high earner and Arts and Hims student have better career prospects. So, what next?

Which report?

@shuggarushed
A lot of the highest paying degrees are vocational and STEM-Dentistry, medicine, engineering etc.
https://www.whatuni.com/advice/career-advice/highest-paying-degrees/109831/

Top universities and degrees for employability
https://www.thecompleteuniversityguide.co.uk/student-advice/where-to-study/top-universities-for-employability

University debt is definitely an issue. Some people are saying that with interest rates the debt is increasing much quicker than they expected. I think Martin Lewis suggested before that if you have a good job and you are likely to pay the debt off, it is better to do it earlier before the debt increases if you can.
Young people need to think carefully about whether it is better to go straight into work/apprenticeship rather than doing a degree. For example, it might make more sense to go straight into accountancy as the companies are saying there is no advantage to a degree. If you can get a Law degree apprenticeship then that may be better as there are too many law graduates relative to training contracts (success rate is 19%).
Students also need to think carefully about where they do their degree and employability afterwards.
The three year university experience allows young people to grow up slower before getting a job and allows them to have fun but when it is over is it worth £53,000?

https://londondaily.com/britain-s-highest-paying-degrees-according-to-uk-graduate-salaries

A change I think will happen is that degrees will become 2 years not 3.

This is a good idea

There's no easy answer here IMHO. The whole university and student financing system is a mess. Lots of critics of the current university system blithely trot out that schoolkids should do apprenticeships instead but it is hard to see where tens or even hundreds of thousands of apprenticeships would be created to replace university courses.

In the 2023 cycle 554,465 people were accepted through UCAS to start an undergraduate degree.

In the 2023/24 academic year, there were 50,110 starts in degree level apprenticeships.

I can't find any later figures.

I’ve never understood his positive stance on student loans. It makes no sense to me to waste so much money on interest or potentially have debt into your middle age. I think we’ll see a ‘mis-sold’ sort of challenge in the future.

Speaking as a lecturer, this is a terrible idea. Students come so I'll equipped for university. This will not help - and yes, I guess we'll get people say teaching it like school, five days a week. But really it doesn't work like that. We'll go round the houses again on this one. I think it is amazing how much students develop over three years.

You can find reports that argue it this way it that...but this from Forbes in 2023 in US context I find interesting. Of course, AI is transforming a lot of careers.

In addition, The New York Times also finds that any earnings advantage that STEM majors hold over humanities majors fades by age 40. There are two major reasons that contribute to this - first is that technical skills become obsolete quicker as younger graduates enter the workforce. In a recent working paper, Harvard economist David Deming calculated the change in required skills for different jobs over time. He found that “help-wanted ads for jobs like software developer and engineer were more likely to ask for skills that didn’t exist a decade earlier. And the jobs of 10 years ago often required skills that have since become obsolete.” This higher skill turnover in STEM fields is correlated with the relatively slower earnings growth of STEM graduates between graduation and age 40

Well tech skills certainly do evolve, and not all tech workers get the opportunity to upskill (it's always cheaper to upskill younger workers), and not all have the softer skills required to become managers, so I can see the logic. But I'd be sceptical of the relative numbers compared to other types of grad. It'd like to scrutinise the analysis but, like most people, I don't have time. 🙂

It's almost impossible to calculate if it'll be "worth it" or not.

I don't anticipate DD earning much more than £30,000 or the future equivalent.

Which means paying around £37 per month, over forty years that's £18,000.

If she's had four years of fun, intellectual stimulation, freedom and self-development (she's on a four year course) I don't think that's an outrageous price to pay.

I think it needs to be three years.

But how will she pay for a house, pay bills, pay for unexpected house maintenance (new boiler), run a car/transport, holidays with friends etc?

I appreciate not everyone can earn in excess of £30k pa, but surely by going to University our children aspire to earning more than a just a small amount over minimum wage.

A lot of the reason is the vast increase in average pay and higher pay rates anyway

I absolutely loved uni, I feel sad that it is so expensive for my DC to go (if that is what they choose to do).

I earn 45k pa full time equivalent before tax (have only worked part-time for last 16 years). I'm not sure it'd make financial sense for me to go to uni today, but I would feel sad to have never had the experience or made the life long friends. I only had 4.5 years working full time after I graduated.

I will still support DC if they choose to go to uni, but will definitely encourage them to study something that will hopefully lead to a job.

Provided her loving parents can hand over the money before we need care we'll give her enough of a deposit to keep her mortgage costs low.

Plenty of people in this country have to survive on a wage like that.

Even if she ended up with a job paying £50,000 that would still mean paying £54,000 in total.

People spend £10,000 going on a cruise or £20,000 on a larger car than they need, or a more luxurious kitchen than necessary.

So why does having four years at a uni need to justify itself?

As I said upthread I don't know why people think the experience of going to university is valueless.

Nobody thinks it's wrong to pay for a £1000 holiday every year just for the experience, so why is having three full years of doing something you love (and being able to develop yourself in all sorts of interesting ways) need a justification?

The current student loan system is a tax on social mobility, not on education. Politically I reject the framing of "graduate tax".

The worst case scenario for a student debt holder seems to be that you start out with an average job and slowly claw your way up the ladder to earn above average, but in the meantime your loan accumulated a whole bunch of interest so you'll be paying off pretty high rates for the rest of your career.

Not a problem for those who get it paid off by parents or a job in IB/law/consulting just out of uni, or those who immediately go part time.

(If he's going to start making political messages about student loans, I wonder if he'll address the gender divide re: who ends up paying back the most...)

You're right, I wouldn't stop them from going. I'd rather have the uni experience than a fancy kitchen, or expensive holidays, any day of the week.

If they choose to go to uni they'll need to be lots of research to hopefully ensure it's the right uni and right course, and they don't drop out after a year! There is definitely more pressure to get the decision right.

But you can not justify two days a week at university with the amount it costs. Especially accommodation.

It doesn’t seem fair to ditch the loan or not have to pay if low or not earning. A relative did degree, MA and phd and is now a sahm. The loan should pursue you till the end!

Presumably the threshold at which the loan starts to be repaid will be subject to fiscal drag along with eg tax bands; I think it currently sits at around the amount that would be FTE (49 hpw) for NMW? So even on NMW graduates would have to start paying back more in future years

ML’s narrative has definitely changed, over the last couple of years, which I think is good, as he was imo a bit too vocal without considering the nuance of it all

The population was sold a lie by Tony Blair that " Education, Education, Education " needed to be a degree from a university, hiding the fact that some of the useful career pathways via higher level apprenticeships were disappearing as industry in the UK disappeared.
Creating degrees in subjects with with no employment prospects effectively hides youth employment figures and moves the financial burden from the benefits budget to student loans.
Plenty of adults have become useful citizens without the "university experience" but you need jobs available for youngsters to do this.
That's where the problem lies.
IMO student loan company shouldn't be funding courses that are not linked to qualifications that are needed in the job market.
Schools shouldn't be pushing non academic students down these routes.
Government needs to encourage business and industry so they will feel confident to take on apprentices and teach them real useful skills.
As things stand, loads of students will never pay back their loan because they did courses that were never going to link to work.
I think there will be an increase in poor mental health in these groups as their disillusionment with having been sold a lie becomes a reality.
The graduates for subjects in demand probably did benefit from the university experience as they always have and will pay at least some or part of their loan.
Unfortunately many will be paying from abroad as the overseas big companies poach all our homegrown medics, surgeons, engineers and academics.