- 89% of students say COVID made university worse value for money
- Only 18% of graduates believe they will be able to repay their student loan
- Parents underestimate student debt on graduation by 45%
A quarter (26%) of young people aged 16 to 24 who are not planning to go to university cite COVID-19 as a factor in their decision, up from 18% last year, according to new research from the Association of Investment Companies (AIC) conducted by Opinium. The most common reasons stated for coronavirus being a factor is that young people were concerned they would struggle to pay for university fees due to the financial impact of the pandemic and that they were worried that going to university might increase the risk of them catching the virus.
According to the AIC’s survey, current students have been similarly affected. Nearly nine in ten (89%) students currently at university stated that COVID-19 has made their time at university worse value for money, an increase from 82% last year. The top three reasons given were the reduced face-to-face teaching hours (73%), a more limited experience of the social side of university (54%) and the impact on students’ mental health which had affected their university work (39%).
Graduates who were at university during the pandemic reported a similar level of disappointment. Four fifths (81%) said the pandemic made their time at university worse value for money due to the reduced amount of face-to-face teaching (87%), the limited experience of university social life (50%) and that the pandemic had reduced their chances of getting a job (36%).
Demonstrating the disruption of the past year, less than half (44%) of students agreed that their time at university is good value for money, down from 59% in 2020. Amongst graduates the figure is 46%, a decline from 55% in 2020. Over a quarter (27%) of young people planning to go to university considered not going because of the pandemic.
Despite the disruption, young people planning to go to university anticipate they will finish their course with average debt of £37,803. This is close to the debt burden anticipated by students in their final year of university (£36,943). However, the average parent expects their children to leave university with debt of £24,852. All these estimates fall short of official figures which indicate the average debt of a student who finished their course in 2020 is £45,000.
Currently more than £17 billion is loaned to 1.3 million students each year. The value of outstanding loans at the end of March 2021 was £160 billion, with the government forecasting this will rise to around £560 billion by 2050.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), comments: “The results show what a huge impact the pandemic has had on students, both those currently studying and young people who might have gone to university but have decided against it. As restrictions ease, thousands of young people across the country will still be preparing to start university courses. Our survey shows that students are more realistic about the level of debt they will graduate with, but parents are wide of the mark despite many planning to contribute towards their children’s university costs.
“Sadly, cash remains the preferred method for parents to save, yet the potential of investing over the long term could be life changing. If parents had put away £50 a month in the average investment company over the past 18 years, a total of £10,800, they would now have a pot of £37,383, enough to clear almost all of a young person’s student debt.”
Two-thirds of parents (66%) are planning to help their children with university costs, but there is a large gap between parents from social grades ABC1, where 71% contribute or plan to contribute, and those from social grades C2DE, where the figure is 48%. There is also a regional divide, with parents from London (78%) being more likely to contribute financially than those from the North West, West Midlands and East of England (each at 61%) and Yorkshire and Humberside (51%). Over a third (35%) of parents stated that coronavirus has made it more difficult for them to support their children through university.
Cash remains king
Parents are much more likely to use cash savings accounts for their children’s future than invest in the stock market. 59% of parents have used cash accounts, compared to 16% who have used investment companies and 15% who have invested in shares.
Will payback time ever come?
Most graduates (91%) took out a loan to finance their time at university, but fewer than one in five (18%) of these believe they will be able to repay it in full. Current and prospective students are more optimistic, with 34% of those who plan to have a student loan or who already have one expecting to pay it back in full. However, a further 29% think they won’t be able to pay it back, while the remaining 36% are unsure. There was more confidence among male students about their ability to repay their loan fully, with 45% anticipating this would be achievable, compared to 26% of female students. Students who anticipate they will be able to repay their loan think it will take an average of 13 years to pay it off.
When it came to understanding the terms of their loan, only 20% of graduates who had a loan said they were completely clear about how the interest on their loan was calculated and only 26% knew the interest rate they were paying on their loan.