Young people in debt hits an all-time high

102,296 people aged 17-24 years old reported debt issues in the last year, a rise of 21 per cent from the previous year and a record high.

This figure is published by Citizens Advice, and forms part of its recently released report, Unsecured and Insecured?. The data in the report shows that a young person's average unsecured debt now stands at £12,215. With this figure at just £3,988 in 2006 prior to the financial crash, debt among young people has more than tripled between 2006 and 2012; the latest year that data from the Wealth and Assets Survey is available. 

This increase in debt is sparked by a torrent of unsecured borrowing by young people, which could trap the younger generation in problem debt for years to come. 

The research undertaken by Citizens Advice highlights that as well as the vast increase in the volume of debt held by young people, the types of loans have changed also. Approximately 45 per cent of the debt rise can be attributed to student loans, however the much of the increase is due to formal loans and borrowing from friends and family.

The results show that the average formal loan of a young person prior to 2006 stood at £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. 

In contrast, the younger generation has seen a decrease in credit card debt, from an average of £332 to £234. The results showed that other age groups are twice as likely to report credit card debt than 18-24 year olds. 

Young people recorded an average debt to income ratio of almost 70 per cent, much higher than the 34 per cent recorded for 25-29 year olds, and 11 per cent for 60-64 year olds. Further, a much higher proportion of young people than old people now apply for Debt Relief Orders, which allow indebted borrowers on low incomes to file for bankruptcy. 

With UK households already owing £170 billion, unsecured debt is growing faster than both secured debt and incomes. Forecasts suggest that at the current rate this debt could hit £350 billion by 2020, pushing debt to income ratios back toward the pre-crisis levels seen in 2006. 

Gillian Guy, Chief Executive of Citizens Advice, said: "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."

A further study undertaken by Gocompare showed that over 20 per cent of young people said their debts made them feel depressed. 40 per cent said they wished they weren't in debt but didn't let it get them down, and a further 32 per cent were repaying their debts and felt that they were managing financially. Just 17 per cent of young people considered their debt to be usual among people.