Phil Harris

OMG no more LOLing as youth debt hits all-time high

The word on the grapevine is that the UK’s economy is set to be the fastest-growing of the G7. Commodities are cheap, wages are higher than inflation and consumer confidence (and therefore spending) is on the rise. All good news then…

Those of you indulging your new found “confidence” by skipping along to your local shopping centre to treat yourself to that pair of leopard skin brogues or Chanel’s latest odour toilet may have found yourselves wading through a sea of teens also looking to spend their hard earned cash on the latest craze.

According to a recent report published by CAB, in the last year 102,296 people aged between 17-24 years old have unsecured debts averaging £12,215, a rise of 21 per cent from the previous year and a record high.  Prior to the financial crash this figure stood at just £3,988.

Approximately 45% of the debt rise can be attributed to student loans, however much of the increase is also due to formal loans and borrowing from friends and family.

The results show that the average formal loan obtained prior to 2006 stood at just £969, but has now increased to £4,577. Loans from family and friends also rose over this period from an average of £30 to more than £1,000.

Those among them lucky enough to be employed for at least six hours a week at minimum wage (depending on age from £5.30 per hour) can expect to hand over an average of almost 70% of their hard earned wages to service their debt, much higher than the 34% recorded for 25-29 year olds, and 11% for 60-64 year olds.  The national living wage is only applicable to 25 years and older.

As a consequence a much higher proportion of young people compared to the more mature population are now applying for Debt Relief Orders (“DRO’s”) as a way of dealing with their rising debt issues.  The rise of the DRO is only likely to increase with this google savvy demographic becoming more aware of the solutions to “having it now and paying for it later” (or not as the case may be).  The criteria for applying for a DRO are assets worth less than £1,000 (or in youth speak; a decent laptop and the PS4) and owing no more than £20,000.

Gillian Guy, Chief Executive of CAB, was quoted: “Our research shows that student loans account for less than half of the debt rise amongst young people so it is crucial we understand why so many are turning to other forms of unsecured borrowing.  Many young people already face challenges getting on the career and housing ladders – doing this while saddled with huge unsecured debts make it an uphill struggle.”

It would appear that our youth are potentially compounding an already difficult financial future for themselves which has led to increased calls for the teaching of basic financial skills as part of the national curriculum in order to raise awareness of the long term impact of debt.