Retired, or Hoping to Be, and Saddled with Student Loans

Retired, or Hoping to Be, and Saddled with Student Loans

ABI Bankruptcy Brief

February 27, 2020

ABI Bankruptcy Brief

Retired, or Hoping to Be, and Saddled with Student Loans

A report by the Consumer Financial Protection Bureau (CFPB) found that Americans older than 60 are the fastest-growing group of college loan debtors — the vast majority of them borrowing for others, the New York Times reported. In all, more than 2.8 million Americans over 60 are contending with student debt, a number that has quadrupled from 700,000 in 2005, according to the bureau. The cost is swelling, too: Between 2012 and 2017, for those aged 60 and older, the average amount of student loan debt almost doubled, ballooning to $23,500 from $12,100. A 2019 AARP Public Policy Institute report found that 15 years ago, borrowers 50 and over held $47 billion of the nation’s $455.2 billion in student loan debt. By 2018, that figure had risen to $289.5 billion of an overall $1.5 trillion. Julie B. Miller, a researcher at the M.I.T. AgeLab who is studying how college debt affects family relationships, said student loans and longevity planning are at odds within many debt-saddled households. Pre-retirement milestones like paying off a mortgage get shelved in favor of paying off loans, she said.

U.S. Official: Disaster Recovery Pace in Puerto Rico Sped Up

The newly appointed U.S. official charged with overseeing disaster recovery in Puerto Rico said Tuesday that while the pace of federally funded projects to help hurricane and earthquake victims has quickened, he’s worried about long-term efforts, the Associated Press reported. The comments by Peter Brown, White House special representative for Puerto Rico’s disaster recovery, came after he met for the first time with officials in the U.S. territory amid criticism that the local and federal government response has been slow. “The reputation seems to lag the reality. The reality is improving,” he said, adding that he will report to President Donald Trump upon his return to the U.S. mainland. “I think he will be convinced that federal money and federal efforts are being spent wisely here.” Ever since Hurricane Maria hit Puerto Rico as a Category 4 storm in September 2017, Trump has been accused of delaying and denying aid to the U.S. territory amid concerns of corruption and government inefficiency on the island. The U.S. Congress has approved nearly $50 billion to help Puerto Rico, but federal officials have only disbursed roughly $15 billion. Brown, who previously served as commander of the Miami-based U.S. Coast Guard’s Seventh District, said that while he’s aware many were dissatisfied with the pace of recovery, it has changed dramatically in part because of the relationship with Puerto Rico’s new governor. Alex Amparo, Puerto Rico’s coordinating officer for the Federal Emergency Management Agency, said the agency was tentatively approving 10-15 projects a month six months ago. Now, it’s up to 160 projects per month.

U.S. Companies Face Crucial Test over China’s Factory Shutdown

The next few weeks will be crunchtime for U.S. companies awaiting products from stalled Chinese factories due to the coronavirus, the Washington Post reported. If their suppliers spring back to life soon, many companies say that they should be able to manage without disastrous disruption. But the uncertainty is keeping managers up at night. The variables go beyond the number of employees allowed to return to work after weeks of quarantine. Factories will need enough raw materials to restore production, and enough protective masks to keep workers safely in place for the foreseeable future. They’ll also need Chinese truckers and functioning ports to ensure that goods can make it to market. For many U.S. companies, the coronavirus has exacerbated troubles they were already having with manufacturing in China, after the Trump administration last year levied large import tariffs on Chinese-made goods. The virus is also hitting multinational companies that sell their goods inside China, where mass quarantines have stalled one of the world’s biggest markets. Deere last week said its sales of road-building equipment have softened over the past month as construction has halted in China, which usually makes up 10 to 15 percent of sales. Fast-food chains and other retailers, including Starbucks, Domino’s Pizza and Lululemon, have closed stores in China or postponed new store openings. American Axle & Manufacturing, an auto parts maker based in Detroit, said it expects about $25 million in lost sales during February and early March as car manufacturing slumps in China.

Research Examines Whether Subprime Borrowers Drove the Housing Boom in Mid-2000s

The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing narrative attributes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. Yet a post on the New York Fed's "Liberty Street Economics" blog presents evidence that is inconsistent with conventional wisdom. In particular, the researchers show that the housing boom and the subprime boom occurred in different places. House price growth was fastest in the western part of the country, Florida and the Northeast Corridor, while the fastest growth in the subprime share of purchase lending occurred in areas like the Midwest and Ohio River Valley. Simply put, the housing boom and the subprime boom occurred in different places. High house price appreciation may have made property increasingly unaffordable for subprime borrowers, leading to a “pricing-out” effect, according to the researchers. They found that higher house price growth lowered the relative likelihood of a subprime individual becoming a homeowner. Taken together, these findings are consistent with a pricing-out effect.

Duberstein Bankruptcy Moot Court Competition – Call for Judges on Sunday Morning

Each year, the American Bankruptcy Institute and St. John’s University School of Law co-sponsor the Duberstein Bankruptcy Moot Court Competition, which brings teams from law schools throughout the country to New York to argue two sophisticated bankruptcy issues. This year, 60 teams are participating in the competition in New York, which will be held from Saturday, February 29, through Monday, March 2, 2020. More than a dozen bankruptcy, district and court of appeals judges will judge the advanced oral rounds and attend the Gala Awards Reception at Gotham Hall on March 2. This year’s hypothetical addresses §§ 365(c)(1) and 1129(a)(10) as tied together by a compelling business bankruptcy fact pattern. The hypothetical can be viewed here.

The Duberstein Competition is looking for volunteers to serve as judges on Sunday morning, March 1, at St. John’s University’s Queens campus. CLE credit is available, and the commitment is only for one half-day (unless you are interested in participating in multiple sessions). To register to serve as a judge for one or more sessions of the preliminary rounds, please complete this Preliminary Judge Form.

If you have any questions about the Duberstein Competition or serving as a preliminary round judge, please do not hesitate to contact Paul R. Hage, co-director of the Duberstein Competition, at (248) 840-9079 or [email protected].

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New on ABI’s Bankruptcy Blog Exchange: Banks Walk Fine Line in Preparing for a Coronavirus Outbreak in U.S.

As the COVID-19 virus spreads globally, many U.S. financial institutions are said to be taking steps to protect employees and minimize disruption. But only a handful are sharing specifics, to avoid contributing to any public panic.

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