moneygrad

The rise of student debts in the UK of the 2015 graduates following the increased fees

University students graduating from class 2015 are said to have the highest student debts in history according to the recent UK graduate career survey, by High Flyers Research. This is the first cohort of graduates that have had to pay the increased university fees of up to £9000 which has left many of them with average debt of more than £30,000. This is more than a £10,000 increase to the students who graduated in 2012. This figure will be even higher for medics who have to study five years, sometimes six depending on the university, which could potentially leave the students with debts that they can’t pay back or will be paying back for majority of their working life. This figure is lower than the predicted figure of £53,000 than that predicted in 2011 by The Push University Guide[i]. However the UK graduate career survey study also shows that more students are now likely to find jobs than in previous years. [ii]

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UK Graduates poised to attract higher salaries

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A recent report published by High fliers Research Limited “The Graduate Market 2015” reveals an increase in graduate recruitment levels; it’s highest for a decade. The annual report, which surveys the country’s top 100 graduate employers, found that that the median starting salary for graduates will reach £30,000 for the first time this year, up from £29,000 for the past few years.

The study suggests that students leaving university this summer will find a buoyant graduate job market. Employers increased their graduate recruitment by 7.9 per cent in 2014, and will expand the available vacancies for university leavers by 8.1 per cent this year. The highest salaries in 2015 will be those on offer from investment banking (a median of £45,000), law (median of £40,000), banking & finance (median of £36,500) and oil and energy companies (median of £32,500). However, Aldi is said to be among the biggest payers outside the traditional firms, with starting wages of up to £42,000 on offer for trainee managers. Students preparing to enter the jobs market in 2015 are the first generation to pay £9,000-a-year tuition fees. While some argue that the high salaries are in place to enable students to pay back their student loans, the report said it was unlikely that starting salaries were raised as a response to the hike in fees but rather to compete with rival companies.

So how do graduates secure a place in these lucrative roles? The key to securing a top role is undertaking work placements at the firm in question, the study suggests. The survey evidences that a third of jobs are expected to be offered to graduates who have managed to do this. A greater proportion of the UK’s leading graduate recruiters are now offering paid work-experience programmes for students and recent graduates, with an unprecedented 13,049 available this year. Two-thirds have paid internships during the holidays for final-year students and half make industrial placements available as part of degree courses. There are also an increasing number of firms now offering placements for first-year undergraduates. Those with no work experience are unlikely to be successful applicants and have little or no chance of receiving a job offer through graduate programmes, half of the recruiters said.

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Student loans: Challenges in reforming loan structure

The issue of student loans has been flaring up on both sides of the Atlantic quite recently, with some serious implications for higher education if many of the changes were to be implemented in the next few years.

In the US, the efforts of the administration to enact legislation that will ease the financial burden incurred on university students by way of their student loans and the federally subsidized grants has been a major point of friction with Republican opposition. Student loan debt is estimate to close to 1 trillion USD, increasing at a staggering rate of 300% in ten years , whereas the average debt load for the graduates of higher education is approximately $20,000 on average. Given the recovery phase of the US economy and the financial woes that have troubled it since 2008, it becomes obvious that debt restructuring is a key issue.

The importance is twofold. Student loans are proving to be a heavy financial burden, stifling entrepreneurship and forcing many graduates to abandon career aspirations and seek even low-paid employment in order to repay their loans; in the days of the financial crisis aftermath, many find themselves still unemployed and with a negative credit score, painting a rather bleak personal picture of the future. In addition the student loan apparatus involves the federal government, the universities and a series of market players, such as debt relief companies and others, which makes reform not only gruelling but also politically tense.

In the United Kingdom, the government will be conducting research on the issue of student loans, although the department of Business, Innovation and Skills has not confirmed a change in policy. The UK has a relative advantage to the US system since tuition for undergraduate study is capped at £9,000 per year. The system is also more generous, since it allows repayments only if the graduate is employed and earning over a certain amount and the debt itself has a 30 year write off term limit, with outstanding fees written off after that period has elapsed.

The proposed research will be exploring the possibility of making universities partially responsible in underwriting student debt. In theory, this would lead to a closer connection between the graduates and the university, perhaps increasing the investment and effort UK universities will need to put forth in order to ensure high employability rates for the students. It will also mean a shared and thus diminished risk taken on by the Treasury, reducing exposure for the government.

The key issue in the UK remains that if such moves were ever to be implemented, debt to earnings ratios within universities would shrink or even disappear, making universities less able to secure their financial position and thus undertake large and important steps in improving infrastructure, offer scholarships and bursaries to under-represented groups and of course continue to strive for improving educational services without the worry of debt repayment in a flux economic climate. In fact, any alteration to the student loan scheme would have to take under consideration the realities of tertiary education and the job market so as to ensure that the drive for minimal government exposure to debt would affect the teaching quality and outcomes in universities.

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Oxford vice-chancellor challenges tuition fee cap

According to a recent article published by The Guardian, Professor Andrew Hamilton, Vice-Chancellor of the University of Oxford, suggested that the cap on tuition fees is not the best for the British higher education system.

“The idea of a market – and that is what is ostensibly being created – in which every item, virtually regardless of content and quality, is the same price seems, well, a little odd,” he said. “On the other hand, given the great diversity of the institutions in our higher education system, the notion of different universities charging significantly different amounts doesn’t feel inherently unnatural. It is the current situation that seems out of kilter.”

Regardless you agree or not with  this statement, it compels us to think higher education in a different way. From an economic point of view, is it instrinsically different from other markets? Does it require a special set of regulations? Is there a breaking point after which ‘affordability’ may start harming teaching and/or research quality?

Although there are no easy answers for these controversial questions, a voice coming from one of the top universities of the world is worth listening to.

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Student protest against tuition fees in Hungary

Tuition fee hikes spread to other European countries. Maybe Hungarian tuition fees are not as mediatised as in the United Kingdom but it is worth mentioning them.

According the OECD report, Education at a Glance 2011, during the 2008-2009 academic year, 25% of full-time Hungarian students were paying tuition fees to access higher education, and the vast majority (75%) were state financed with a scholarship. In 2013, it has recently been announced 80% of students will now face paying annual tuition fees of between $446 and $892 (HUF50,000 and HUF100,000)*. Although the number of part-time scholarships in Hungary will increase from 5,000 in 2011 to 46,330 on 2013, full-time scholarships will, nonetheless, dramatically drop from 53,450 in 2011 to 10,480 in 2013. Furthermore, if students want to apply for a loan, it will be done under some conditions such as after graduation they will have to work in Hungary for twice as long as their study duration otherwise, they find a job abroad, they will have to pay back the outstanding amount. Students protested in mid-December 2012 in Budapest against the introduction of tuition fees, concerned poorer students will be those suffering the most.

*Exchange rate of the 4th January 2013.