Getting a lower degree grade at UK university could cost you

IFS research found that both men and women who graduated from a U.K. university with a lower second class degree in 2013 were earning £3,800 less on average a year before tax, five years later.

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Failing to achieve a top grade at college could mean earning around £3,800 ($4,946) less a year, according to new study by a leading independent research institute in Britain.

The research, published Wednesday, found that both men and women who graduated from university in Britain with a lower second-class degree (known as a 2:2 in the U.K.) in 2013 were earning £3,800 less on average a year (before tax) five years later.

That was in comparison to students who had graduated with an upper-class second degree (known as a 2:1) which is considered to be the average grade that many British students are awarded.

In the U.K., a first-class honors degree, or 1:1, is the highest classification a student can be awarded for their degree. This is then followed by a 2:1, a 2:2 and a third-class honors degree.

The research was produced by the U.K.’s Institute for Fiscal Studies and was commissioned by the government’s Department for Education. The main earnings estimates were based on a sample of around 470,000 graduates who were born between the 1985/86 and 1987/88 school years, who had started an undergraduate or postgraduate course by the age of 21 (between 2007 and 2009) and completed their degree by the age of 27 (between 2013 and 2015).

The IFS found that women who graduated from a U.K. college with a 1:1 degree were earning on average £2,200 more than those with a 2:1, five years later.

And this earnings gap was even bigger between men who graduated with the top grades. Men who graduated with a first-class honors degree in the U.K. were typically earning £4,100 more than those who were awarded a 2:1 degree.

In addition, the IFS found that achieving at least a 2:1 had a much bigger payoff at some of the U.K.’s best colleges. Students who graduated with a 2:2 from the U.K.’s “most selective” universities ended up on average earning 20% less at age 30 than those with a 2:1 degree, according to the study.

The IFS named the four most selective universities as Oxford, Cambridge, Imperial College London and the London School of Economics. Those universities are included in a group of 24 of the U.K.’s leading colleges, known as the “Russell Group,” similar to the “Ivy League” in the U.S.

Gender pay gap

The study highlighted that there was a stark difference in the payoff for men and women after achieving a first-class degree at one of the most selective U.K. universities. The IFS report said there was a “near zero” payoff to women for getting a 1:1 over a 2:1 at one of these colleges, while men typically earned 14% more a year for graduating with the highest classification.

Grades also mattered depending on what subject graduates had studied. For instance, men and women who studied law or economics and graduated with a 2:2, tended to end up earning 15% less than if they’d achieved a 2:1 in either of those subjects.

The IFS pointed out that there had overall been a long-term trend toward students earning higher degree classifications across all subjects and at all levels of university selectivity.

Ben Waltmann, senior research economist at IFS and co-author of the report, said that the findings implied that “degree classification may matter as much as university attended for later life earnings.”

“Other things equal, going to a more selective university is good for future earnings, and the fact that few students from disadvantaged backgrounds attend the most selective universities is a barrier to social mobility,” he said.

The cost of getting a degree is continuing to rise for U.K. students. Under government plans announced in February, students who start college in the U.K. next year could end up still repaying student loans into their sixties. In the U.K., the state usually fronts university tuition and some living costs, which graduates then pay back out of their monthly pay check once they earn above a certain amount, like a tax.

Check out: Soaring prices are hitting young Brits. The new UK budget won’t help much

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