by Zoe Fripp
The CEO of the Financial Conduct Authority has warned that the number of young adults borrowing money to cover living costs is rising in the UK.
While it has not yet reached a level of emergency, the FCA raised concerns that the number of 18-34 year olds with crippling debts has grown substantially. The FCA’s Chief Executive, Andrew Bailey, told the BBC that part of the reason is the shift in income between the generations which has resulted in the greater indebtedness of millennials today.
He said: “[The shift] reflects lower levels of real income [and] lower levels of asset ownership. There are quite different generational experiences.”
Mr Bailey also attributed other factors to the debt such as the high price of renting and the lack of income growth alongside this, meaning young people are having to borrow to pay for essentials.
According to the Insolvency Service, between 2015 and 2016 the number of students that lacked the necessary funds to repay their debts had risen by 31.3% in the UK. Citizens Advice also reported last month that there had been a 34% rise in under 25’s seeking help with high-cost credit in the last two years.
Liberal Democrat leader, Vince Cable, spoke about “the worrying accumulation of debt in the UK” and how it is affecting under 40’s; the politician quoted as having criticised the Conservative party for their unfulfilled ‘breathing space’ scheme.
He said: “The Conservatives have forgotten about their manifesto pledge… so that people in serious difficulties can have legal protection from interest, charges and bailiffs for six weeks. For the head of the FCA to make this intervention shows how urgently this must be introduced.”
It can be assumed that students are likely to form a large part of the percentage of young people borrowing money due to the expenses accumulated from accommodation and for the future requirement of repaying maintenance loans. Because of this, The Trident decided to get the opinion of some of the University of Hertfordshire’s students about this potential need to borrow money for basics.
Amy McEnroe, currently in her second year studying Primary Education, admitted that she would, in fact, take out an extra loan if necessary.
She said: “It’s a short-term fix to help pay the rent and bills such as gas, electric and water when student finance doesn’t cover me.”
When asked if she believed the loan would leave her in a better position financially, Miss McEnroe was under no illusion of what taking out a payday loan would mean, explaining, “It makes your debt overall worse, but it’s a short-term fix for the month.”
Molecular Biology student, Adeeba Ali, currently in the second year of her course, is residing in local student accommodation and has found herself forced to borrow money.
She said: “I have to borrow quite a lot of money from my parents and I’ve had to cancel my car insurance recently because I can’t afford to keep paying that and paying my rent and bills. My student loan is a lot short of what I need, so the rest is coming from my parents.”
Save the Student, a student-targeting money advice website, warns students to avoid payday loans with crippling interest rates, as they may feel beneficial at the time but can make the situation worse.