A degree is a smart investment

Students recognise that earning a degree creates great benefits for them and their families, and that’s why they are willing to take on an average of $15,000 debt as they know they’ll earn $1.3-$4 million more over their working lives than a non-graduate, says Chris Whelan, Executive Director of Universities New Zealand.

Chris Whelan says in response to a media story on student loans, “Many students are getting ready to start or return to university, and it’s important that they can make informed choices based on accurate information.”

“Universities New Zealand analysis of Census data clearly shows that degree holders get jobs, pay off their debt, have better job security, and earn more over their working lives.  Graduates also report that they’re happy and healthy.”

Chris Whelan says that while there has been a small increase in the average loan in the last few years, the main reason for this increase is that more students are pursuing 3-4 year degrees and fewer are choosing 1-2 year certificates and diplomas.  “The longer you study, the more you are likely to borrow, but the greater the benefits.”

“Students undertaking shorter courses will naturally incur less debt, but they’re also likely to earn less over their working lives. Median hourly earnings are 65% higher for New Zealanders with a degree or higher qualification compared with those with no qualifications – this is more than twice the earnings premium of those with lower level tertiary qualifications.” 

“Another key reason for increased loan size is that we’ve seen a change in what students study; today about half of all bachelor’s degree students are studying science, technology, engineering, health or the environment.  They’re taking on qualifications that have higher fees, so there will be a corresponding increase in student loans to cover course costs.”

Universities New Zealand Census analysis has found that a typical bachelor’s student earns about $1.3m more over their working lives than a non-graduate.  This income premium is much higher for medical doctors ($4m), professional engineers ($3m) and information technology graduates ($2m).

On average, students pay off their loans by the age of 33.  At this point, net earnings from a degree exceed the cost of getting a degree and income foregone while studying.

An independent study of graduates two years after they finished university, found that they were highly satisfied with their lives, already earning around the national median income after only two years in the workforce, and that just 2.7% were unemployed.   Unemployment rates for non-graduates are typically three to four times higher.

Graduates are also happier and healthier.  88% of New Zealanders with a degree or higher qualification have high levels of satisfaction with life compared with 83% of those with lower level qualifications and 77% of those with no qualifications. Degree holders also have higher levels of trust, a greater sense of purpose, better self-rated health and are more accepting of diversity. 

“Most New Zealanders would recognise that while we all benefit from an educated population and work force, it is fair that students contribute to their tertiary education, which is also an investment in their future.”

“We often hear anecdotes about individual students who rake up huge loans, are unemployed, and struggle to pay them back.  The national Census data indicates that these students are the rare exception rather than the rule.”

For more information - see New Zealand's Universities Key Facts & Stats