Student loans in Europe: Is university worth the debt?

Higher education is costly due to the tuition fees and living expenses. The debt burden is a significant factor that may affect individuals’ decisions to invest in university education. In the UK, for example, a quarter of students do not think going to university is worth it, Ipsos found in a recent survey of May 2023. The main reasons for this opinion are fees (49%) and student loan debt (42%).

More than a third (37%) also believe they do not need to go to university to get a good job. In 2016, Aviva’s research had revealed more than one in three (37%) British millennials (18-35 years old), who went to university, regret doing so because of the level of debt they are now in.

Apparently, a lot of people question whether a university degree is worth the debt or not. There is no simple answer to this question. It is a multifaceted and sophisticated issue.

Comparing university fees, loans and financial support is challenging, with many complex dimensions to consider. They vary significantly across Europe. Average salaries and employment of recent graduates by educational level also differ.

Euronews Business looks at all these aspects to provide insights in a response to this main question: Is university worth the debt?

According to the European Commission/EACEA/Eurydice’s National Student Fee and Support Systems in European Higher Education – 2020/21 report, full-time home students pay no fees in first-cycle programmes in seven of 42 higher education systems across Europe. These are Denmark, Greece, Cyprus, Malta, Finland, Sweden and Turkey. There are no fees in public higher education institutions in Norway, too.

In contrast, in 12 higher-education systems, all first-cycle students pay fees. They are Belgium (German-speaking and Flemish communities), Luxembourg, the Netherlands, Portugal, the United Kingdom (England, Wales and Northern Ireland), Albania, Switzerland and Iceland.

In the remaining 23 education systems, there are some students who pay fees, while others do not. Fees might be different for various education programmes or fields of study.

In Czechia, Germany, Croatia, Poland, Slovenia and Slovakia, full-time students mostly pay only administrative charges of up to €100 according to the Eurydice report. In 14 higher education systems, annual fees vary from €101 to €1,000.

In Ireland, Spain, Italy, Hungary, the Netherlands and Switzerland, the most common fee is relatively high, ranging from €1,001 to 3,000.

Annual fees are highest in the UK

The most common annual fees are the highest in England, Wales and Northern Ireland across Europe.

In England, the undergraduate home fees are currently capped by the government at £9,250 (€10,737). In the 2022-23 academic year, the average tuition fee loan was £8,230 (€9,446) in England, £8,410 (€9,653) in Wales and £5,490 (€6,301) in Northern Ireland, according to the Student Loans Company.

Tuition fees were abolished for Scottish students studying in Scotland in 2000.

Most common fees were also above €2,000 in Iceland, the Netherlands, Latvia and Lithuania according to the EACEA/Eurydice report.

Direct financial support: Grants and loans

​​All European countries offer direct financial support to first-cycle full-time higher education students. Grants and loans are the main forms. Public grants are direct financial aid from the public budget that students do not have to pay back whereas loans have to be paid back, often when they graduate, or have gainful employment. Government bears a part of the costs in publicly subsidised loans, mainly through reduced interest rates.

No public grants in England

All European countries offer at least one type of direct public financial support to their first-cycle higher education students. Public grants exist in all European higher education systems except England and Iceland, according to the Eurydice report. Publicly-subsidised loans exist in around two-thirds of all European higher education systems. Need-based grants are the most common form of direct financial support in Europe.

Compared to public grants, loans are less used by students. In the academic year of 2019/20, there were no publicly-subsidised loans in 13 education systems.The proportion of loan beneficiaries was less than 5% in seven education systems, and it was below 15% in six countries. This was one in five in Turkey, and one in three in Iceland.

Share of loan beneficiaries were highest in the UK, Nordic countries and the Netherlands.

As seen in the chart above, the highest share of loan beneficiaries was recorded in the UK, the Nordic countries and the Netherlands. In England, Wales and Northern Ireland, more than 94% of home students at the universities benefitted from the publicly-subsidised loans. This proportion was 69% in Scotland.

The UK was followed by Norway (66%), Sweden (55%), the Netherlands (54%) and Finland (49%).

Thus, we look at the loans in these countries, in particular closely the UK.

Debt on graduation rose rapidly to €50,000+ in England

In 2023, the average debt on graduation for English students was around £47,000 (€54,124) according to the House of Commons Library Research Briefing,  entitled Student Loan Statistics and dated December 2023.

The average debt in the rest of the UK for the 2023 cohort was much lower than in England. It was £35,800 (€41,141) for Wales, £24,500 (€28,155) for Northern Ireland and £15,400 (€17,968) for Scotland.

Student Loans Company and GOV.UK data shows that the average higher education loan balance on entry to repayment increased from £10,050 (€14,686) in 2007, to reach £44,940 €51,667) in 2023.

England top spot for highest average student debt

Looking at other European countries, England recorded the highest average debt on graduation. According to the OECD, the average student debt on graduation in the academic year of 2019/20was €51,367 in England. It was €27,491 in Norway, €14,907 in Denmark and €14,807 in Finland. The average student debt on graduation in the Netherlands, was €16,227 in 2017/18 year.

Countries with high tuition fees are also those with the highest levels of student debt at graduation, the OECD report found. “However, in Nordic countries, where there are low or no tuition fees, the level of student debt at graduation may still be high because living expenses are high”, it added.

Students loan €23 billion per year in England, total debt passes €230 billion

Currently, £20 billion (€23 billion) per year is loaned to around 1.5 million higher education students in England each year. At the end of 2022-23, total publicly owned debt for English higher education students and EU students studying in England reached some £205.6 billion (€236.3 billion). That compared with more than £50 million at the end of 2013-14 and more than £100 billion at the end of 2017-18.

The increase in each of the last three years was more than £20 billion (€23 billion). Outstanding student loan debts are expected to peak at £460 billion (2021-22 prices) in the mid-2040s according to the research briefing.

Students’ loan repayment

In England, 66% of students in the first large repayment cohort (2002) had repaid their loan in full; this fell off to 33% of the 2010 cohort, 23% of the 2012 cohort and 7% of the 2016 cohort according to the research briefing, based on Student Loans Company dataset.

The year refers to when the first becomes liable to repay. This is the April after the completion of a student’s course.

As of April 2023, 35% of the 2021 cohort were in the UK and repaying their loans at the time. Some 42% of the 2021 cohort were working in the UK, but earning below the threshold and hence not repaying. This rate fell to 11-12% for the 2015 and earlier cohorts.

Is it worth it?

The significant question is still whether going to university is worth it or not. Looking at the impact of a university degree in finding jobs and average salaries can provide useful insights.

In 2022, 86.7% of higher education graduates aged 18-34 in the EU were employed whereas this rate stood at 74.2% in medium level graduates according to Eurostat.

Recent graduates are those who completed their highest education level between one and five years ago and are not in further studies.

Educational level is based upon the International standard classification of education (ISCED), and refers to:

● Low: pre-primary, primary and lower secondary education (ISCED levels 0–2);

● Medium: upper secondary and post-secondary non-tertiary education (ISCED levels 3 and 4);

● High: tertiary education (ISCED levels 5–8). It includes public and private universities, colleges, technical training institutes, and vocational schools.

How does the employment of recent graduates vary by education?

The employment gap between tertiary, and upper and post-secondary recent graduates was 12.5 percentage points (pp) in the EU. This suggests that a university degree helps in finding a job after graduation.

Except in Iceland, the employment rate of tertiary graduates was higher than upper and post-secondary graduates in all countries.

In 2022, the gap between two educational levels largely varied, ranging from -0.8 pp in Iceland to 31.2 pp in Romania.

This gap was above 20 pp in nine countries. Those were mostly Balkan or Eastern European countries. It was also 18 pp in France and Spain.

In the UK in 2018, the difference was 8.7 pp.

In some countries such as Chechia, Norway, the Netherlands, Portugal and Germany, the gap between two educational levels in employment was below 6 pp.

Do university graduates earn more?

Yes, they do. However, it significantly varies across Europe. University graduates are substantially better paid than non-graduates in some countries, while the earning gap between them is less in others.

In 2022, the median equivalised net income for full-time workers (16-64 years old) was €26,304 whereas this was €18,876 for those with medium level of education.

Equivalised disposable income is the total income of a household, after tax and other deductions, that is available for spending or saving. It accounts for income distribution as well as household size and composition.

Rather than looking at the net incomes, ratios of them between education levels provides useful insights in comparing the countries.

The graph below shows how the role of education in salaries significantly differs in Europe.

In 2018, the ratio of high education level to medium level in median equivalised net income varied from 1.08 in Norway to 1.69 in Romania. This ratio was 1.39 in the EU, indicating those with higher education earned 39% more than with medium education level.

Earning gap is low in the Nordic countries

Nordic countries, Norway, Denmark and Sweden recorded the lowest ratios, suggesting education level was less important compared with other countries. It was also 1.28 in Finland.

This ratio was 1.33 in the UK (2018 data).

Not surprisingly, this gap rises between high and low education levels. It was 1.7 in the EU.

However, the education earning gap between high and low levels was still not substantial in the Nordic countries and the Netherlands. The ratio was 1.27 in Denmark and Norway, followed by the Netherlands (1.33) and Finland (1.39). It was 1.58 in the UK.