The Guardian published this last week. It mentions that essentially 25 to 34 year olds made up a quarter of 44,000 debt relief orders granted in the UK over two years.
The DRO can pay off a debt of up to £15,000 but comes with a price – you won’t be able to get credit for years and it doesn’t pay off student loans. But what I thought about is, for example, postgrads who take commercial bank loans to pay their fees and don’t find paid work after graduation. These loans usually come with high interest rates, high rates of monthly repayments and no flexibility if you can’t afford to pay back.
The article says that student loans are in part responsible for getting people used to borrowing large amounts from an early age (and perhaps also getting used to not paying them back), so where the 25-34 year old a generation ago would have been more settled financially, the outlook is “bleak” for today’s young people.
It is also becoming increasingly easy to borrow money that people might not be able to afford to pay back. Some students spend three or four years living off a free overdraft, but by the point of graduation, their bank demands the sum to be paid within a year or two and the graduate could fall into trouble if they can’t pay up.
Debt is a difficult topic to advise on because people earn and spend in different ways and some people who owe money may not realise they’re in trouble until it’s too late. The Guardian’s article links several debt advice providers, to which I would add The Site as a source of digestable, young-people-relevant advice.
However, there are some basic things that everyone who’s looking at financial trouble can do:
1. Tell someone: talk to your parents. It’s hard, I know, but once you’re out with it and the mild interrogation is over, they’ll be strategising and making phone calls like a bad episode of the Apprentice.
2. Talk to your bank (or to your other money-lenders). Giving them a heads up won’t mean that you’ll necessarily get relief, but they can and do try to hold back on things like fines and extra fees.
3. Work out if you really need to borrow money. This takes a calculator and a fair bit of brutal self-honesty about spending habits. If there is a financial lifeline that doesn’t involve loans or credit cards, consider taking it, whether that may be a second job, borrowing from parents, or decreasing the amount you spend.
As far as graduate life supposedly advocates independence, it shouldn’t reflect badly on a person if they choose to seek help with money-related problems, or any kind of problem at all. Parents may judge but are very likely to help; banks may find ways to help prevent the slide into further debt. Check out the links on Guardian or The Site for more info, and happy spending.