Stop Hiring Graduates
Craig Parry
Head of Statistical Programming in Biotech | CDISC Subject Matter Expert | Volunteer
First things first, some people may read the title and could get a little bit angry, so to reduce the tension right off the bat, I’m a graduate, and have nothing against today’s graduates. I guess a more suitable title would be “Stop Discounting Non-Graduates,” but if I had used this title, you may not have clicked the article.
Anyway, in the Biostatistics industry almost every single job advert states “educated to degree level or higher”, thus immediately ostracizing a large proportion of the population. Statistically speaking, pun intended, this would primarily exclude the young, ambitious, and motivated, all because somehow a non-graduate is not worthy, even before you have spoken to them.
If you have not clicked off this article yet, let’s tackle the elephant in the room, we shall call him Larry, I totally understand that certain positions require a level of knowledge which likely does require an education to a degree level. For example, I am likely not going to make a great Statistician having only a GCSE in Mathematics, Conversely, just because someone has a master’s in management does not automatically result in me becoming the best manager.
We really need to understand why people chose to not go to university, because when I went to university in 2010, the reason my peers did not attend university is vastly different to why people likely do not go university today in 2024.
University in 2010
When I went to university in Wales back in 2010, it cost me a little over ￡3,000 per year on tuition, I also lived away from home which gave me access to “extras”, i.e., a non-repayable grant and a repayable maintenance loan. Now the amount of these “extras” was fully dependent on my parent’s household income, the lower the household income the more financial help I would receive. Unfortunately, or I guess fortunately in this case, I was from a single parent household, so our family income was far below the yearly threshold of ￡18,370. This gave me access to a yearly non-repayable grant of ￡5,000, and a yearly repayable maintenance loan of about ￡1,600. After 3 years, while factoring in the tuition fees and “extras”, I had accrued a debt of:
Note, this plan was labelled a Plan 1.
Fees in Wales Prior to 2010
As a side note, the year I attended university, i.e., 2010, the Welsh Government stopped their Welsh Tuition Fee Grant, which would have seen my yearly tuition fee be halved, i.e., ￡1,500 instead of ￡3,000, I missed this benefit literally by a year. However, the removal of this grant ensured Wales became more aligned with the tuition fees scheme in England, so there wasn’t huge uproar about its removal, even I did not think much of it at the time. Anyway, I digress.
Living Costs
As mentioned earlier, living away from home is why I was eligible for the grant and the maintenance loan, i.e., these “extras” allowed me to live away from home. Back in 2010 the average rental cost for a student, for a single room in a house share was between ￡75 to ￡110 per week, or about ￡300 to ￡440 a month. Since university was around 8 months, the yearly rental cost was between ￡2,400 to ￡3,520. Considering I was getting a ￡5,000 grant and a ￡1,600 maintenance loan (totalling ￡6,600) a year and I also worked on the weekend, the rental costs were manageable. Of the ￡6,600 grant / loan I would spend between 36% and 53% on rent, leaving me with a good amount of money to buy food with and simply live.
Payments from 2013
Fast forward 3 years, I have my BSc in Mathematics and a debt of about ￡13,800, which would only become repayable once my pre-tax earnings were above ￡20,195 a year. Luckily, I landed a job paying more than this threshold the same year I graduated, so I was paying back my student loan almost immediately. That said, each monthly repayment was calculated as 9% of the amount of pretax income I earned above the threshold, i.e., using the Welsh average salary back in 2010, this would be 9% of (￡23,000 - ￡20,195) which equated to ￡252.45 a year or about ￡21 a month. Again, I would argue this was totally manageable for me at the time.
Interest Rates Between 2013 and 2021
Like all debts my student debt accrued interest, however the interest rate was tied to the Retail Price Index (RPI) or the Bank of England base rate plus 1%, whichever was lower. So, in 2013 the interest rate applied to my debt was 1.5%. Even in today’s standards this is a great interest rate for any loan. In fact, my interest actually went down during the initial years to as low as 0.9%:
Debt Free 2021
Over the years, I progressed in my career, in doing so my monthly repayments grew larger, and in 2021 I was able to pay back my student debt in full. This gave me a huge sense of achievement, in fact back in 2013, there were reports out that only around 30%-40% people would pay back their loans in full, before the 30-year cut off, and being part of this statistic felt great. As a note, in Wales (and England) under this Plan 1 scheme, after 30 years a student’s debt is wiped off by default, even if there is a remaining balance.
To further understand why people may choose to skip university today, let’s consider the same path detailed above but as if I was starting university this year.
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University in 2024
If I was in the position to go to university now, and I wanted to attend the same university in Wales, my yearly tuition fees would now be ￡9,000, going up to ￡9,250 for years 2 and 3 due to the incoming increase in 2025. Like before, the non-repayable grant and repayable maintain loan are still available. Oddly, even the tuition fees have tripled, the family income threshold for the grant and maintenance loan remains at ￡18,370, which is baffling. However, the amounts I would be eligible for have increased. As my parent still falls below this threshold, today I would be entitled to a yearly grant of ￡6,885 and a yearly maintenance loan of ￡3,430. So, again factoring tuition and these “extras”, after 3 years I would have a debt of:
Note, this plan would be labelled Plan 2.
Living Costs
Unlike 2013, the average rental cost for a student is far higher, but also harder to pin down an average range because it varies wildly. Current student rental costs range between ￡112 to ￡186 a week or ￡448 to ￡744 a month. So, in the same 8-month period, the yearly rental cost would be between ￡3,584 to ￡5,952. However, this time round my grant of ￡6,885 and loan of ￡3,430 (totalling ￡10,315) is higher than that it was back in 2010. Of the ￡10,315 grant / loan I would spend between 35% and 58% on rent, which is comparably the same as what I was paying in 2010, however the cost of everything else has gone up so the remainder of my money would not stretch as far as it did in 2010.
Payments in 2024
How about the repayments you may ask, imagine I have my BSc in Mathematics but this time a debt of about ￡38,000. Like before, I would not be required to pay this debt back until my pre-tax annual earnings were above a certain threshold, which is currently sitting at ￡27,295. Let’s assume I landed a graduate job paying the average salary in Wales, which is about ￡32,000. Similar to how things were in 2013 the repayment amount is calculated as 9% of the amount of money I earn above the threshold, so 9% of (￡32,000 - ￡27,295) = ￡423.45 a year or about ￡35 a month. It may seem like these payments have remained largely unaffected as the 9% has remained the same and the threshold has actually increased from ￡20,195 to just above ￡27,000, but this is only true in the short term. Let me explain.
Interest Rates in 2024
The monthly repayments remain fairly similar as seen above however the same cannot be said about the interest rates applied to the debt. The calculation is a tad confusing, but long story short, the interest rates attached to the debt is far higher than when compared with the interest rates of 2013. Today’s interest rate is sitting at 7.7% compared to 1.5% in 2013. What blows my mind is that interest applied to your debt would be significantly larger than the amount you pay back each month, thus resulting in the debt growing even though you are making payments each month. This is because with such a high threshold and an even higher interest rate the monthly repayments are less than the monthly interest accrued on the debt.
To see how baffling this is, the https://www.student-loan-calculator.co.uk/ has a great tool to predict your future student debt repayments. It even adjusts for regular salary increases, interest changes and threshold changes. Plugging the following numbers into the tool gives some interesting results:
After 30 years, I would have paid a total of ￡57,623 in repayments (about ￡32,000 in today’s money) and the debt would have grown so much the remaining balance is ￡49,387 (or about ￡20,000 in today’s money). Yes, even after 30 years of payments, I would still owe ￡49,387 (adjusting for inflation).
I was fortunate enough to be able to pay back my debt in 8 years back in 2021, but if I wanted to achieve and pay off today’s student debt in the same timeframe, from day 1 I would need to earn more than ￡80,000 a year, almost three times the average salary. But this assumes the student debt is not retrospectively changed, like it has been before. I find this 30 year “student tax” awful, for some reason there is very little said about this in the political sphere. However, there are changes coming.
Incoming Changes
The government is rolling out further changes to the student loan process, with the introduction of something called “Plan 5”. Which sees a drop in the repayment threshold going from ￡27,295 to ￡25,000, but the increase of the repayment term going from 30 years to 40 years. However, how the interest rate on the debt is calculated is changing for the better, i.e., no longer is it RPI + 3% and it will just be based on RPI, which will likely see the interest rate drop from 7.7% to just over 3%. There are predictions that this new plan could see about 50% of students repay their debt in full before the 40 years are up, but financial based predictions are nearly impossible to predict, and maybe we are going to see this “student tax” last the whole 40 years in the majority of cases.
Conclusion
Even though the number of people going to university remains pretty high and is ever increasing, I can understand why some people would opt for a different route, and as long as I am in the privileged position to interview and hopefully hire talented and motivated people, I will never disregard someone who did not go to university. Instead, we can create better pre-screening questions and processes regardless of the degree status.
I cannot speak for those choosing not to go to university today, but if I was 18 today, going to university would require more thought than it did back in 2010. Yes, I understand student debt in the UK does not hamper your ability to borrow, i.e., it’s not the same as other “debts”, but if I knew there was a possibility to see deductions in my pay packet for 40 years, I would wonder if all those payments really made university a good decision.
Well done, you made it to the end, Larry thanks you.
Institute for Fiscal Studies (ISF) article: https://ifs.org.uk/publications/changing-geography-jobs