$2 Billion in Student Loan Debt to Be Forgiven Under PSLF Program, with More on the Horizon​​​​​​

$2 Billion in Student Loan Debt to Be Forgiven Under PSLF Program, with More on the Horizon​​​​​​

November 18, 2021

 
ABI Bankruptcy Brief
 
 
 
NEWS AND ANALYSIS

$2 Billion in Student Loan Debt to Be Forgiven Under PSLF Program, with More on the Horizon​​​​​​

The Biden administration is in the process of cancelling $2 billion in student loans for 30,000 borrowers, Forbes reported. “Check your inboxes!,” said Secretary of Education Miguel Cardona in a tweet last week, noting that $715 million in student loan forgiveness had already been finalized, with another $1.2 billion on the way. “Over the coming weeks, more borrowers — including veterans & service members — will get emails” about student loan forgiveness, he said. The relief that Secretary Cardona was referring to is a new expansion of the Public Service Loan Forgiveness (PSLF) program, which forgives the federal student loan debt of borrowers after 10 or more years of qualifying public service employment for nonprofit and government organizations. Last month, the Biden administration announced that it would temporarily relax some of the core PSLF program requirements. The PSLF program requires 120 “qualifying payments” for a borrower to achieve loan forgiveness. Previously, only Direct federal student loans, and certain types of repayment plans based on a borrower’s income, would count toward a borrower’s student loan forgiveness term under PSLF. Due to a combination of confusing eligibility criteria established by Congress, poor facilitation by loan servicers, and a lack of oversight by the Department of Education, many borrowers who thought they were on track for PSLF were not actually complying with the program’s rules. Other student loan borrowers were doing everything right, but encountered bureaucratic red tape and other administrative issues that caused payments to be rejected. As a result, the PSLF program has long suffered from low approval rates. Under the new changes announced last month, which the administration is calling the “Limited PSLF Waiver” program, the Department is temporarily relaxing the rules governing PSLF to allow most types of federal student loans, and most types of repayment plans, to qualify. The Department will also be counting past payments that should have qualified but were rejected due to technical issues or other errors.​​

U.S. Weekly Jobless Claims Drop to 268,000​​​​​​

The number of Americans applying for unemployment benefits fell for the seventh straight week to a pandemic low of 268,000, the Associated Press reported. U.S. jobless claims dipped by 1,000 last week from the week before, the Labor Department reported today. The applications for unemployment aid are a proxy for layoffs, and their steady decline this year — after topping 900,000 one week in early January — reflects the labor market’s strong recovery from last year’s brief but intense coronavirus recession. The four-week average of claims, which smooths week-to-week volatility, also fell to a pandemic low of just below 273,000. Jobless claims have been edging lower, toward their pre-pandemic level of around 220,000 a week. Overall, 2.1 million Americans were collecting traditional unemployment checks the week that ended Nov. 6, down by 129,000 from the week before. Until Sept. 6, the federal government had supplemented state unemployment insurance programs by paying an extra payment of $300 a week and extending benefits to gig workers and to those who had been out of work for six months or more. Including the federal programs, the number of Americans receiving some form of jobless aid peaked at more than 33 million in June last year.​​

REGISTER FOR FREE!

Mortgage Bills Are Coming Again, but $10 Billion in Aid May Arrive First​​​​​​

The $10 billion Homeowner Assistance Fund, part of the $1.9 trillion relief plan enacted by Congress and the Biden administration, will be crucial for still-struggling homeowners now that other measures — particularly the forbearance programs that put mortgage payments on hold for millions of Americans — are coming to an end, the New York Times reported. The legislation gives state, territorial and tribal governments wide latitude to help homeowners with expenses, with priority given to those who live in an area of “persistent poverty” or belong to a group that has been the subject of historical racial, ethnic or cultural discrimination. This week, New York became the first state to receive final approval for its plan; Gov. Kathy Hochul said in a statement that New York would distribute nearly $539 million for homeowners who were “at the greatest risk of foreclosure or displacement.” Each program sets its own rules, including how long it provides aid, the amount per household and the expenses covered. New York, for example, will provide up to $50,000 for costs including mortgage payments, utilities, broadband service and delinquent property taxes, with payments going directly to loan servicers, utility providers or tax authorities.​​

Supply-Chain Snarls Deliver Windfalls to Wall Street​​​​​​

Global supply-chain bottlenecks are creating headaches for retailers, delays for consumers — and big gains for financial firms that invested in container ships before the pandemic upended the logistics business, the Wall Street Journal reported. New York-based Mangrove Partners, which managed $1.3 billion at the end of September, was up 70% for the year through October. Roughly half of the hedge fund’s gains stem from shipping investments, said a person familiar with the firm. Mangrove focuses on inefficient or out-of-favor industries. Dublin-based hedge fund Pilgrim Global was up 105% for the year through September, thanks in part to a stake in Oslo-listed MPC Container Ships, according to an October investor letter. The fund managed about $100 million at the end of last year. MPC Container Ships stock is up 214% this year. After nearly a decade of distress, windfalls suddenly abound in the notoriously boom-and-bust container-ship sector. Danish giant A.P. Moller-Maersk A/S reported a profit of $5.44 billion for the third quarter — almost as much money as Amazon.com Inc. and United Parcel Service Inc. combined. Container-liner firm Zim Integrated Shipping Services Ltd., which has been restructured several times in roughly the past decade, had a market value of $1.4 billion at the end of its first trading day in January. It had a market value of $6.3 billion as of Wednesday. (Subscription required.)​​

Munis Set for ‘Golden Decade’ of Credit with Infrastructure Aid​​​​​​

U.S. municipalities are set for another massive infusion of cash from the $550 billion infrastructure package, leaving participants in the muni-bond market to assess the impact on the nation’s states and local governments, Bloomberg News reported. In a nutshell, the analysis boils down to a big takeaway: It’s great for credit quality in the $4 trillion market. Bank of America Corp., for example, sees a “golden decade” of credit ahead. But on the other hand, all that cash may even suppress bond sales. The legislation will unleash spending in an array of areas: It allocates around $110 billion for roads and bridges, $66 billion for rail and $39 billion for public transit. Another $65 billion is earmarked for connecting Americans to high-speed Internet, while $65 billion will go to the power grid and $55 billion for drinking-water systems. The influx comes as municipalities have already collected a historic infusion of $350 billion of federal cash from the American Rescue Plan.​​

Can’t Travel to WLC? Attend Online to Catch All of the Engaging Programming!​​​​​​

You will not want to miss insights from some of the country’s top insolvency and restructuring experts on issues confronting the profession in 2022 at ABI’s 2021 Winter Leadership Conference, taking place Dec. 9-11. Click below to watch a promo!


Now offering a virtual attendance option, the conference will feature 24 concurrent sessions addressing a diverse spectrum of key insolvency topics for both business and consumer practitioners, including a 2022 economic outlook, mass tort chapter 11 cases, the future of the SBRA, real estate restructurings and more. Register today to attend via an engaging virtual portal to grow your knowledge and network!

Analysis: Amendments to the Federal Rules of Bankruptcy Procedure Take Effect December 1, 2021​​​​​​

This year, there are only four bankruptcy rule amendments expected to take effect on Dec. 1, according to an analysis by Robert Eisenbach on JD Supra. They are all relatively minor technical or administrative revisions. Amendments include:

• Rule 2005, addressing release conditions for a debtor taken into custody, was amended to refer to the correct section of Title 18.

• Rule 3007, governing the servicing of claim objections, was amended to make clear that an insured depository institution, now identified only as one “defined in section 3 of the Federal Deposit Insurance Act,” also has to be served pursuant to Rule 7004(h) and its more rigorous service requirements (including certified mail in some situations). Although a minor change, it’s a good reminder of the special service rules that apply to FDIC-insured depository institutions. The Committee Note clarifies that this provision does not apply to credit unions because they’re covered by National Credit Union Administration insurance instead of FDIC insurance.

• Rule 7007.1, involving corporate ownership disclosures, was amended to align with similar disclosure rules in the Federal Rules of Appellate Procedure and the Federal Rules of Civil Procedure. It has been revised to apply only to nongovernmental corporations, including when such corporations intervene in bankruptcy cases and adversary proceedings.

• Rule 9036, governing notice and service, was amended to address high-volume paper-notice recipients and to specify procedures for such recipients related to the Bankruptcy Noticing Center (BNC).

• Although not a Bankruptcy Rule, Federal Rule of Appellate Procedure 6, which governs bankruptcy appeals, was also revised slightly but only to change the reference to a form given the amendments made to Federal Rule of Appellate Procedure Rule 3 (which, in turn, split former Form 1 into Form 1A and Form 1B).

Click here for the full set of rule changes.
​​

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!

Tap into Rochelle’s Daily Wire via the ABI Newsroom and Twitter!

BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: SBA Chief Defends Direct-Lending Proposal

A hotly contested proposal that would allow the Small Business Administration to make small loans directly to borrowers would help “correct for gaps” in access to capital for disadvantaged businesses, Administrator Isabella Casillas Guzman says, according to a recent blog post. Appearing Tuesday before the House Small Business Committee, Guzman repeatedly defended the plan in the face of skeptical comments by Republican representatives. They questioned the wisdom of departing from the agency’s traditional model of backing loans made by private-sector lenders.

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

 
© 2021 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314