Mortgage industry impacts on new college graduates

MORTGAGE INDUSTRY IMPACTS on NEW COLLEGE GRADUATES: STUDENT LOANS, JOB MARKET, & HOME BUYING OUTLOOK

TECHNICAL REPORT

LETTER of TRANSMITTAL

This letter serves the purpose of transmitting the technical report entitled: "Mortgage Industry Impacts on New College Graduates: Student Loans, Job Market & Home Buying Outlook." This technical report is being transmitted to Professor Doe on the part of Joe Smith and is a report that informs what college students can anticipate in the future in relation to the impacts that student loans and the job market will have upon their home purchasing potential following college and in consideration of the burden of student loan debt obligations. This report will demonstrate that the outlook for students attending colleges under today's provisions of financial aid and student loan programs will create a great burden of debt for these students and in fact, will demonstrate that colleges have overcharged students at exorbitant rates and that the driver for this was the federally guaranteed student loan program. Finally, this report provides a guideline and some much-needed and useful information for the college student which will enable them to make the wisest choices possible concerning the college they choose to attend and the manner in which they handle the financing necessary to secure a college degree while simultaneously avoiding many of the pitfalls of incurring debt for the opportunity to earn a college degree.

MORTGAGE INDUSTRY IMPACTS on NEW COLLEGE GRADUATES: STUDENT LOANS, JOB MARKET & HOME BUYING OUTLOOK

TECHNICAL REPORT

LIST of FIGURES iv.

ABSTRACT v

INTRODUCTION 5

TERMS & DEFINITIONS 6

EDUCATION SPENDING and FEDERAL FINANCIAL AID 7

DECLINE in PAY LEVELS AMONG COLLEGE GRADUATES 10

THE BASICS of STUDENT LOANS for COLLEGE 19

PERSONAL & PROFESSIONAL RISKS of STUDENT LOAN DEBT 21

VII.INVESTIGATION of a PROGRAM of STUDY at a COLLEGE or UNIVERSITY 21

VIII FUNDING MECHANISMS 27

FINDINGS of the STUDY 27

CONCLUSION 29

BIBLIOGRAPHY 30

MORTGAGE INDUSTRY IMPACTS on NEW COLLEGE GRADUATES: STUDENT LOANS, JOB MARKET & HOME BUYING OUTLOOK

LIST of FIGURES

FIGURE PAGE NO

Federal Financial Aid Comparison

1980 and 2004 8

Use of Students Loans's Related to Parental Education

Students in Their Late Twenties

Borrow Most from Government

Student Loan Programs 12

Comparison of College and University Types and Prospects of Employment Following College Graduation 23

Measures of Satisfaction 24

MORTGAGE INDUSTRY IMPACTS on NEW COLLEGE GRADUATES: STUDENT LOANS, JOB MARKET & HOME BUYING OUTLOOK

TECHNICAL REPORT

II. TERMS & DEFINITIONS

Student Loan Debt Consolidation: Consolidation of student loan debts is a process by which all the separate loans are placed into one single loan, which generally results in one having lower payments and many times a lower interest rate.

Debt Consolidation Specialist: This individual, if qualified and reliable is likely to be found through referral of the school one is attending. One may also contact local government offices for referrals to a good debt consolidation specialist. Information may also be found on the Internet concerning debt consolidation services.

Grants: government funding that does not have to be repaid.

Scholarships: college funding that does not have to be repaid in the form of sports scholarships, scholarships won in beauty pageants and other contests and events, and scholarships presented by civic organizations and businesses to students to assist their funding for college.

FAFSA - the Federal Student Loan Application for Free College Funding.

I. EDUCATION SPENDING and FEDERAL FINANCIAL AID mere generation later, "state spending on higher education is at a 25-year low and federal financial aid is increasingly debt-based, with only 38% in the form of grants." (Draut, 2008) Students do not receive assistance in being able to afford college but instead are assisted into very deep debt for having attained a college education. Last year Congress passed the College Cost Reduction and Access Act, an act that will provision $20 billion additional student aid over the next five-year period and while held to be an improvement of a major sort the reality is that the impact of this act on access to college will be "negligible." (Draut, 2008) the act made only very modest improvements including:

1) increasing the Pell grant maximum about approximately $500 per year over a five-year period of time reaching $5,400 by 2012;

2) increasing an income-based repayment system that caps the amount student borrowers would pay on their loans to 15% of their discretionary income; and 3) reduces the interest rates that new student loans charge reducing them by fifty-percent in 2012. (Draut, 2008)

III. DECLINE in PAY LEVELS AMONG COLLEGE GRADUATES

Draut (2008) states: "The paycheck decline experienced by this new generation of young workers can partly be explained by the disappearance of manufacturing jobs that offered good wages for workers without college degrees, and the proliferation of low-wage service-sector jobs in their place, with no public policy for professionalizing those jobs or helping unions to organize them. In addition to lackluster wages, these jobs offer little room for advancement and few, if any, fringe benefits. Today, about 29% of young adults -- a full 18.2 million 19- to 34-year-olds -- don't have health insurance, making this the age group with the largest percentage uninsured. In addition to often working in a benefit-free zone, moving up the wage or career ladder in the new economy is more difficult than it was a generation ago. The well-paying middle-management jobs that characterized the workforce up to the late 1970s have been eviscerated. Corporate downsizing in the 1980s and 1990s slashed positions in the middle of the wage distribution, and now outsourcing threatens to take millions more. And unions, which also helped facilitate upward mobility particularly for those outside the professional ranks, have been pummeled by illegal management tactics and government failure to enforce the right to organize. The same government has allowed corporations to misclassify permanent jobs as contract work, denying employees other hard-won legal protections." (Draut, 2008) the following chart shows the funding comprising federal financial aid in 1980 as compared to 2004.

Federal Financial Aid Comparison 1980 and 2004

Source: Draut (2008)

Draut relates the fact that in decades past the term 'real job' "used to mean the first job you got after completing school. A real job allowed you to pay rent, buy groceries, make car payments, and have enough left over for spending money. A real job also came with fringe benefits such as health care and some type of retirement savings plan." (2008) This is however, no longer the reality as individuals in their twenties and thirties quickly realize. According to Draut, today's full-time worker incomes for those ages 25 to 34 are lower today than they were a generation ago, except among workers with college degrees." (2008) Today's young male workers who had only a high school education "earn 29% less than they did in 1974..." (Draut, 2008) partial explanation for the decreasing pay levels among workers today is the "disappearance of