GAO Finds Expanded Student Loan Forgiveness Program Still Rejecting Most Applicants

GAO Finds Expanded Student Loan Forgiveness Program Still Rejecting Most Applicants

ABI Bankruptcy Brief

September 5, 2019

ABI Bankruptcy Brief

GAO Finds Expanded Student Loan Forgiveness Program Still Rejecting Most Applicants

The Government Accountability Office (GAO) released a report today finding that the vast majority of applicants to a program designed to forgive student loans for public servants are still being denied, despite an effort from Congress to expand the program, The Hill reported. The GAO found that just 661 out of 54,184 requests, or 1 percent, for the new Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program were accepted in its first year, from May 2018 to May 2019. Congress created the expansion program to the Public Service Loan Forgiveness (PSLF) last year after an outcry that the system's requirements were so rigid and poorly communicated that lawmakers needed to step in. The expansion program also came in response to a report from the GAO last year finding a PSLF rejection rate of 99 percent. PSLF was created in 2007 to forgive the remainder of federal student loan debt for graduates who pay loans for 10 years and work in a qualifying job for the government or a nonprofit. The program has been under intense scrutiny since last year's GAO report, and this summer the American Federation of Teachers filed a lawsuit over its failure. This year's GAO report recommends that the Education Department streamline the TEPSLF and PSLF application process and improve transparency with borrowers about the program's process and requirements.

The House Financial Services Committee will hold a hearing next Tuesday titled, "A $1.5 Trillion Crisis: Protecting Student Borrowers and Holding Student Loan Servicers Accountable." For more information, please click here.

The issue of student loan debt and bankruptcy is the first problem addressed in the Final Report of the ABI Commission on Consumer Bankruptcy. Click here to download your copy.

PG&E Seeks More than $14 Billion in Equity in Restructuring Plan

PG&E Corp. is floating a restructuring plan that calls for more than $14 billion in equity commitments — while giving no clear picture of what its liabilities may be, Bloomberg News reported. In a draft term sheet, PG&E laid out a reorganization proposal that would have it exiting the largest utility bankruptcy in U.S. history next year by using a mix of debt and equity to cover the costly claims it faces from wildfires that its equipment ignited. The company fell short, however, of giving an actual estimate for those claims, and the plan is due to be filed on Monday. PG&E, California’s largest electric utility, was forced to seek chapter 11 protection in January to deal with claims tied to deadly blazes that devastated Northern California in 2017 and 2018. It warned at the time that its liabilities may exceed $30 billion. The company is now rushing to come up with a plan to cover the costs as bondholders including Pacific Investment Management Co. and Elliott Management Corp. try to pitch their own proposal that would all but wipe out the stake of current shareholders.

Fed Officials Warn the Consumer Is Alone in Carrying U.S. Economy

Federal Reserve officials are weighing two competing forces in the U.S. economy: the resilience of the consumer versus the fallout from uncertainty around trade disputes and weaker global growth, Bloomberg News reported. “The consumer is now carrying all of the weight, or much of the weight, for growth going forward,” Federal Reserve Bank of New York President John Williams said during a speech yesterday. “One thing, though, about consumer spending that you have to be careful about is it’s not really a leading indicator.” As threats from U.S./China trade tensions have chilled business confidence and investment, consumers have been the main drivers of growth. There’s weakness surfacing in manufacturing and concerns brewing in financial markets that the world economy may be heading toward recession. The theme was echoed later on Wednesday by Dallas Fed chief Robert Kaplan, who told an audience in Toronto that he was watching to see whether weak macroeconomic data will filter into consumer attitudes. Kaplan, who isn’t a voter on the Federal Open Market Committee this year, said that if policymakers wait for consumer spending to weaken, it might be too late.

Small Business Hiring Increased in August

A great U.S. job market for workers at small firms got a little better in August, according to the latest monthly employment survey from the National Federation of Independent Business, the Wall Street Journal reported. “Job creation picked up in August, with an average addition of 0.19 workers per firm compared to 0.12 in July," reports NFIB Chief Economist William Dunkelberg. Given that small businesses are still trying to hire more workers, Dunkelberg said that it is “hard to call it a ‘recession’ when job openings still exceed job searchers.” Amid the ongoing American worker shortage, the NFIB report also finds that business owners are not giving up the search for new talent. Friday’s government jobs report will provide a snapshot of the broader economy. (Subscription required.)

Freddie Mac: Mortgage Rates Drop to Another 3-Year Low

Once again, the average U.S. rate for a 30-year fixed mortgage fell to another three-year low this week, according to the latest Freddie Mac Primary Mortgage Market Survey, reported. According to the company’s data, the 30-year fixed-rate mortgage averaged 3.49 percent for the week ending today, down from last week’s rate of 3.58 percent. Unsurprisingly, this average is nearly an entire percentage point lower than the 2018 average rate of 4.54 percent. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.3 percent, slipping from last week’s rate of 3.31 percent. This rate sits significantly lower than the same week in 2018, when it averaged 3.93 percent.

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New on ABI’s Bankruptcy Blog Exchange: Why the CFPB’s Payday Rule Is in the Hands of a Texas Judge

Consumer Financial Protection Bureau Director Kathy Kraninger is under pressure to ask a federal judge to lift a stay that has kept the agency's short-term-lending rule from going into effect, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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