Treat education as an investment rather than debt

Education is important – mostly.

I see people asking the question about education all the time. Is it worth it? Should I take on the responsibility of the debt? My answer is usually yes, but some caveats apply. As someone who lives in the UK, our debt repayment program seems more relaxed than other countries. In the UK, the debt repayment comes out of your income before you receive it – providing you are earning over a certain amount. This makes studying a reasonable choice as the repayment is taken just like any tax on income. You don’t see the payments going and it doesn’t make a difference monthly to your actual balance. That said, there is still a lot to pay. Assume I get a graduate job of £25,000 a year (I am basing this on searching jobs in my area for the field of study) and that I have borrowed around about £45,000 over my three years of study. I will be repaying this for 30 years (thankfully they are written off if not repaid by then) and thus there is a huge cost to making this decision. So, why should you make this decision?

Access to higher wages

Despite the increase in people taking degrees, the wage premium enjoyed by University graduates in their late thirties is roughly 1.6 times as much per hour as that of someone who left education at 16. This ratio has remained relatively constant over the last 30 years and therefore it is obvious wealth benefits are associated with getting a degree. (source)

This increase in wage potential offsets the student debt repayments to a considerable degree and therefore it is worthwhile taking a degree in terms of actual income. Additionally, many friends you will make at University will become professionals and maybe business owners and this can help you with connections in the future.

Personal growth

Not only is University good for your income levels, it also develops you as a person. You will learn many skills applicable to daily life, future jobs, and more. You will have access to different points of views, be able to socialise with people from across the world and be able to refine your thoughts. You might be living on your own whilst at University too – which helps you become independent, learn to budget and learn to look after yourself.

Positives of the debt

As mentioned previously, if you do not repay in 30 years of graduation – the debt is written off. Additionally, the debt will not impact your credit rating at all, so it won’t affect your ability to get loans or anything in the future. The debt is also paid off extremely slowly in terms of the rate you repay. You will hardly notice the money missing and it won’t make a big difference to your circumstances.

Words of caution

Obviously there are some reasons you may not want to take a degree. Firstly, it is important to check what kind of jobs you want to go into – does the income received reflect the minimum of three years spent in education? Do you need a degree for the thing you want to go into? Do jobs actually exist in the field you are interested in? Some degrees I would argue are more passion based. They might not be worth it in terms of cost and benefit analysis. Jobs either don’t exist in the field, or you have to get very lucky in terms of actually getting a high paid job in the field. Do your research first to make sure the degrees and jobs you are looking at make financial sense.


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