Graduates entering the workforce with more debt than ever
Graduates are ending their study with more debt than ever and this presents a problem to employers not only the fledgling new employees.
A recent study by the Institute of Fiscal Studies (IFS) on graduate debt found England’s graduates have the developed world’s highest debts, a trend likely to continue for millennials who graduate in the future.
A further study by accountancy firm PwC predicts graduates will make up 50% of the global workforce by 2020. Rival firm Deloitte thinks this ratio will rise to 75% by 2025.
The figures show that although a higher proportion of workers now start out with a degree, they are also likely to begin their careers attached to a debt millstone.
Just over half a million students will graduate from UK universities this summer, gain their degree and enter the workforce with, according to the latest figures from the Student Loans Company, debt of £32,220 for students graduating from an English university, around £20,000 for students at a university in Wales and Northern Ireland and around £12,000 for graduates from a Scottish university.
Graduates looking for help
Although most graduates leave university confident in their abilities and future prospects, it takes practical experience to manage finances independently for the first time.
Neyber’s DNA of Financial Wellbeing report for 2017 shows that graduates are looking for help in this area, particularly in managing debt and understanding the importance of a credit score to help keep the cost of borrowing down.
Their research shows that debt has a significant impact on the relationships between employees aged 18-34 and their employers, impacting behaviour at work, relationships with colleagues and job performance.
Further data shows younger employees and millennials are much more likely to turn to their employers for financial advice than older workers, showing that millennials actually value financial education from their employers.
What can employers do?
With debt a growing concern for graduates, employers should look to work with recently graduated employees to assuage their concerns and help them navigate their own financial circumstances in a smart and savvy way – a policy that is likely to benefit both parties and help create a successful workplace.
The report highlighted that for those aged 18-24, 54% have limited or no understanding of credit scores and 70% don’t check or review their credit scores and that many 18-24 year-olds experience income fluctuation at the same time as being in the least financially educated age group, which means they have to try and manage a flexible income against fixed outgoings at a time when they are in debt – a tall order for anyone.
Employers can advise on the cheapest way to pay back debt, how having a strong credit score makes you more likely to be able to borrow and at more advantageous rates, the benefits of saving, pension contributions and more.
Financial wellbeing providers understand the concerns of both employees and employers and try and build an understanding between both parties. This enables employers to offer useful services to improve the financial wellbeing of their employees, particularly graduates entering the world of work.
Heidi Allan is head of insights and engagement at Neyber.
This article was provided by Neyber.
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