Supporting Information

Impact of Student Loans

Research shows there is a correlation between student loans and quality of life.  From a young age,  we are taught education is the safest path to financial freedom. However, most graduates quickly find out this is not the case. Regardless of employment status, loan deferment periods end within six months of graduation. Dependent on the type of loan the total could have ballooned to include interest. In addition, student loan management companies offer unrealistic debt repayment plans that are unaffordable. Under these conditions how are borrowers expected to break the cycle of debt?

 

Phyllis Korkki, a New York Times journalist, explains “60 percent of all jobs within the United States are created by small businesses.”  Student loans prevent individuals from saving the required capital to start their own company. Small businesses contribute jobs and innovative services to the local community. If the creation of small businesses decrease, it will impact on our economic growth.

Student loans also impact buying a house, personal savings, and retirement. Diana Hembree, and Natalia Abrams the executive directors of Student Debt Crisis report, “A typical borrower has less than $1,000 in savings, cannot save for retirement and these are not just the younger generations, but lots of borrowers already in their sixties that will most likely not have enough to retire.

This same study is shows over 80% of all borrowers cannot save for retirement, afford to purchase a home, or contribute to charities.  Most borrowers on average owe $88,000 but make $60,000.  That is almost $30,000 more than their annual salary, destroying their debt to income ratio.  A lot of younger borrowers still live with their parents into their 30s.  Now parents and other family members are being impacted.  Instead of preparing for retirement, or going on an anniversary trip or gift, they have to take care of their child.

Individual career paths can also affect the ability to repay student loans. People that perform low-paid public interest jobs such as non-profits, teachers, police, social workers, etc.….  A study done by the National Bureau of Economic Research has shown borrowers today are less likely to take those kind of jobs because of  student loan debt. Instead, they pursue higher paying jobs that may not be in the sector they got their education in. 

In the end it is truly difficult to ignore the impacts that student loans are having on our nation.  It’s impacting the economy, home ownership is lower compared to what it could be, and less available new and exciting job opportunities through startups and small businesses, and saving for our future through investments are put to the side.

Importance of Entrepreneurship and Small Businesses

The United States currently has a record low unemployment rate, however nothing is ever simple.  The current unemployment rate is 3.7% but that is the U3 (Official) rate. The true unemployment/underemployed rate is 8.1% which is the U6 (Real) statistic.  This is where the importance of entrepreneurship and small businesses can come into play.  Per research done by The Center for American Entrepreneurship, the growth in labor productivity has slowed to an annual growth rate of .09 since 2010. 

By injecting financial and operation support into startups and small businesses, we will be able to bring the U6 rate closer to the U3 rate and truly have a low unemployment rate in decades to come in our nation.  Startups will create competition in their given market sectors, by improving productivity.  This productivity will grow the economy, increase salaries and benefits and in the end improve the standard of living in the United States.

Small businesses and startups also bring innovation to the forefront that could have major impacts on our everyday lives.  If we look at a handful of examples in the 20th and 21st century alone, we can see great innovations.  For example, hate it or love it, the first social networking site was Six Degrees found by Andrew Weinreich.  Of course no one today has heard of this site, but that’s the point.  It was the first and others saw what was done and what needed to be improved.  They made the improvements by starting their own company, like Myspace, Facebook, and Twitter.  These innovations have brought many people together, brought communities together and in a lot of ways have had positive impacts on society.

How about touch screens?  The credit goes to Apple, and yes today Apple is a huge company, but let us not forget where Apple started.  In a garage with a man named Steve Jobs.  Apple alone from the beginning as a startup has through time provided us with the Apple Computer, iPhone, iPad, touchscreens and other wonderful products that millions of people use today.  Due to what Apple has created, other companies have brought competition to the market, like Samsung, Google and Microsoft.  There are also startups currently looking into vastly improving the touchscreen, even possibly taking to hologram interface levels!

Have you heard of Abiomed?  If not, this company stated in 1981 but in 2001 created something that has never been created and provided a device to a man in Kentucky that same year.  The very first artificial heart that had no external wires or tubes, it was powered by an internal battery and with the newest versions can last up to five years.  These artificial hearts were developed for people that do not qualify for a heart transplant.  They are working on improving this innovation so that the heart will outlive a human being.  It is businesses like these that spur other innovators in all sectors or the world.  They will bring us the future that will consist of people having artificial limbs that work just like natural ones, 3D printing of organs to save lives, food synthesizers like the ones in Star Trek that will help end world hunger, new propulsion systems, and alternate energy capabilities.  Yet if the growth of startups and small businesses continue to decline, these innovations will not be introduced of if they are, it will be many years after when they should have been.

In the end, entrepreneurs and small businesses are responsible for 60% of all employment opportunities in the United States.  Now factor in the new perspective and ideals on how capitalism should work.  Ideals that companies can make money, people can become wealthy from creating their own business, but at the same time, they and their companies are going to take care of their employees, their communities and the nation.  They are no longer concerned with putting shareholders before all else, they are taking the Friedman doctrine and burning it.  It is a win, win situation for all people of this nation.

Affordable Housing

When we start paying off student loans, freeing people of a shackle like debt and improve the startup and small business environment, many more people will be looking for places to live, to be closer to their work, family and places with greater potential.  However, we are also seeing a housing crisis in the United States. Per an article on Curbed by Patrick Sisson, Jeff Andres and Alex Bazeley, nearly two-thirds of renters nationwide cannot afford to buy a home or even save for a down payment due to ever increasing rent prices and increases in home prices. With not having the ability to pay rent or purchase a home because we have been seeing wage growths being stagnate or growing all too slowly.  There are a lot of other associated reasons why not just the younger generations are having extreme difficulties with housing but generations before them as well.

Unfortunately it is just going to get worse.  From a Forbes article, written by Brenda Richardson, the shortage of housing inventory is getting worse, being caused by an ever deepening construction labor shortage and land costs that seem to double in cost overnight are going to make it worse over time.

A NAHB/Wells Fargo Housing Opportunity Index Reports has shown that since 2018 only 56% of home sales are affordable and that percentage is going down, this is a huge drop from the peak in 2012 where nearly 80% of all existing home sales were affordable.

In our opinion the biggest issue here is rental prices. It used to be that renting was always less compared to the surrounding area’s mortgage rates.  This was to entice people to rent instead of buying.  However with the difficulties of purchasing homes at this time, rental properties are taking advantage of this situation.  Like any other company, rental properties and their management companies research the market and other aspects so they can base their costs and prices off of.  We believe their research has shown the difficulties in purchasing a home for most people today, the average debt to income ratio that isn’t looking all too well in large numbers of people which will prevent them from buying a home, and with all of this information have come to one conclusion.  This conclusion is that people will have no choice but to pay what they demand in rental prices.  They know especially the younger generations, do not have the savings for a down payment, do not have the free income after debt to pay a mortgage bill, and in the end their rental prices have skyrocketed in recent years. Struggle to pay rent to have a roof over your head, or live in your car, it’s your choice.

Even if you are not in this situation and still wondering why you should assist in drastically improving this scenario, ask yourself, “Is this fair?”  In our opinion and countless others, this is far from far, and it causes harm to people that just want to improve their life, afford to invest, save and hopefully one day buy their own home.  They won’t be able to do this if they are paying a third of their income to student loans, another third to rent, and the last third divided to pay off other bills and necessities they need.  This leaves very little for their future.

Another reason to get started on this mission as soon as possible, is more political ideology that is spreading which wants to implement a federal act in rent control.  It sounds like a good idea, an idea to protect the very people we want to help here at FOUR.  However, the issue is, if such a plan is put into place the investors that build apartment complexes will just invest somewhere else.  Per Doug Bibby, president and CEO of the National Multifamily Housing Council, stated “such ideas like this will cause developers to look into other things to build and remove themselves from building new rental complexes.”  Now the issue is going to be an even bigger housing shortage.  The properties already inhabited will be booked and have a waiting list, and ones that are waiting have limited choices. We do not need the federal government to inforce their illogical ideas upon anyone.  The people can control what happens and good companies like FOUR can change the situation.  Instead of building rental complexes and wanting to make as much profit as possible in the short term because people have no other choice, build these rental complexes and rent them at a good price that allows people to invest in their future and not live paycheck to paycheck and not look for an immediate profit.  When FOUR builds these complexes in the near future, our profits will come in 10 to 15 years and still won’t have to raise the rent prices.

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