Unlike any other generation, Millennials are faced with a different economic reality. As in previous generations, college graduates will aspire to status of home owner. What they can buy, when they can buy, who they can buy from and how much they will pay to reach this milestone will be considered in light of their debt load and that of other debt-ridden graduates. This will impact the home buying industry for future generations. Until the level of student loan debt decreases, the cost of homeownership will remain high. “In the next five years, the mortgage industry will see a slow but continual easing of credit standards. In hopes of generating higher demand, lenders will reset certain risk tolerances re-introducing non-prime products,” said John Dyer, Lending Practice lead for Carlisle & Gallagher Consulting Group (www.carlisleandgallagher.com). “The student lending market will undergo a dramatic structural re-engineering for federal loans; especially in the areas of payment terms, default services and consumer protections.”

1. STUDENT
LENDING
MORTGAGE
LENDING
#cginsight
Student Lending Shockingly
Mirrors Mortgage Lending Crisis
Mortgage Loan Debt increased
59% from 2004 to 2010
Student Loan Debt increased
460% from 2004 to 2014
Mortgage Loan Delinquency
(90 + days) Rates increased
from 2004 to 2010
Student Loan Delinquency
(90 + days) Rates increased
from 2004 to 2014
1%
8.9%
6.3%
11%
Have We Learned Nothing From
Past Mistakes?
2009
Financial Stability Act
created the Making
Home Affordable Act
2010
July, Reform and
Consumer Protection
Act was signed into law
2007
Student Loan Sunshine
Act passed
2013
Student Lending
Examination
Procedures passed
Government helps
homeowners and passes
legislation to reform
industry and protect
consumers
Government assists student
borrowers and ensures
student loan lender
compliance
97% 94%
2009
Government backs nearly
97% of U.S. Mortgages
through Fannie Mae,
Freddie Mac, FHA and other
government sponsored
entities
2014
Federal student loan debt
accounts for roughly 94% of
total student loan debt,
$1.05 trillion of a total
$1.11 trillion
6.97 MILLION
PERMANENT LOAN MODIFICATIONS
completed since 2007
1.44 MILLION
INCOME-BASED REPAYMENT (IBR)
completed as of 2014
Traditional choices of previous generations shift when it comes to
home buying and attending college
65.9%64.8%
Home ownership rates fell to 64.8% in Q1
2014, the lowest level since 1995
Only 65.9% of students in the most recent
national class of high school graduates
enrolled in college, the lowest since 2006
Debt Crises Have Altered the Milestone
Trajectories of Millenials
Sources
-
1. Federal Reserve Bank of New York, Household Debt and Credit Report, 2014, http://www.newyorkfed.org/microeconomics/hhdc.html
2. Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit, February 2014, http://www.newyorkfed.org/householdcredit/2013-Q4/
HHDC_2013Q4.pdf
3. USA Today, Foreclosures on the rise, February 2009, http://usatoday30.usatoday.com/money/economy/housing/2009-01-14-foreclosure-record-filings_N.htm
4. Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit, November 2012 http://www.newyorkfed.org/research/national_economy/house-
holdcredit/DistrictReport_Q32012.pdf
5. UNC Chapel-Hill Department of Statistics and Operations Research, Subprime mortgage crisis, http://www.stat.unc.edu/faculty/cji/fys/2012/Subprime%20mort-
gage%20crisis.pdf
6. Citizens Bank, Student Loan Regulations, http://www.citizensbank.com/student-loans/government-regulation.aspx
7. Consumer Financial Protection Bureau, CFPB Releases Exam Procedures for Student Loans, December 2012, http://www.consumerfinance.gov/newsroom/consumer-
financial-protection-bureau-releases-exam-procedures-for-student-loans/
8. Federal Student Aid, Direct Loan Portfolio by Repayment Plan, https://studentaid.ed.gov/sites/default/files/fsawg/datacenter/library/DLPortfoliobyRepaymentPlan.xls
9. Federal Student Aid, Federal Student Aid Portfolio Summary, https://studentaid.ed.gov/sites/default/files/fsawg/datacenter/library/PortfolioSummary.xls
10. Federal Reserve Bank of New York, Household Debt Grows for Third Consecutive Quarter, May 2014, http://www.newyorkfed.org/newsevents/news/research/2014/
rp140513.html
11. Pittsburgh Post-Gazette, College enrollment by recent high school grads is down, April 2014, http://www.post-gazette.com/news/education/2014/04/23/College-enroll-
ment-by-recent-high-school-grads-is-down/stories/201404230010
12. Online Learning Survey, Changing Course: Ten Years of Tracking Online Education in the United States, January 2013, http://www.onlinelearningsurvey.com/reports/
changingcourse.pdf
13. Bloomberg, Treasury Fixing Home-Finance Juggles Bailout, Economy, August 2014, http://www.bloomberg.com/news/2010-08-16/treasury-fixing-mortgage-finance-
system-juggles-limitless-bailout-economy.html
14. Business Insider, Chart of the Day: The US Homeownership Rate Has Fallen To A 19-Year Low, April 2014, http://www.businessinsider.com/q1-2014-us-homeownership-
rate-2014-4
15. Housing Wire, HOPE NOW: 133K loan mods in 1Q2104, May 2014, http://www.housingwire.com/articles/30055-hope-now-133k-loan-mods-in-1q2014
Exotic Mortgage
Products
Rising Cost of
Higher Education
Flat Income
Growth
Fewer Job
Opportunities
Economic Drivers for Crisis