The Student-Debt Crisis Hitting Hardest at Historically Black Colleges



Historically black colleges and universities helped lift generations of African-Americans to economic security. Now, attendance has become a financial drag on many of their young graduates, members of a new generation hit particularly hard by the student-debt crisis, the Wall Street Journal reported today. Students of these institutions, known as HBCUs, are leaving with disproportionately high loans compared with their peers at other schools, a Wall Street Journal analysis of Education Department data found, and are less likely to repay those loans than they were a decade ago. Among key findings of the Journal’s examination of 2017 data, the latest available:



• HBCU alumni have a median federal-debt load of about $29,000 at graduation — 32 percent above graduates of other public and nonprofit four-year schools.



• The majority of HBCU grads haven’t paid down even $1 of their original loan balance in the first few years out of school.



• America’s 82 four-year HBCUs make up 5 percent of four-year institutions, but more than 50 percent of the 100 schools with the lowest three-year student loan repayment rates.



Though HBCUs typically cost less than other public and nonprofit four-year schools, these colleges have long trailed those peers on measures of debt and repayment. Now they are trailing by far greater margins. Many HBCUs see a mandate in giving opportunity to disadvantaged youth, who often start out with fewer financial resources and a diminished ability to pay. Read more. (Subscription required.)



ABI’s Commission on Consumer Bankruptcy recently released its Final Report of recommendations to improve the consumer bankruptcy system, and student loan debt was one of the issues addressed in the report. To obtain a copy of the report and to watch the special briefing by Commission leadership to discuss the Final Report, please click here.

Sears Sues Lampert, Claiming He Looted Company and Drove It into Bankruptcy



Sears Holdings Corp. sued longtime Chairman Eddie Lampert, his hedge fund ESL Investments, and former directors including Treasury Secretary Steven Mnuchin, accusing them of allowing the retailer to be looted of billions of dollars before its October 2018 bankruptcy filing, Reuters reported today. The lawsuit, made public today, was filed by the restructuring team winding down what remains of the pre-bankruptcy Sears following Lampert’s $5.2 billion purchase in February of most of its assets. Sears accused Lampert of ordering the creation of bogus financial plans showing that the retailer would turn itself around even as it racked up huge losses, enabling the transfer of five major assets including Land’s End and Sears Hometown Outlet for his benefit.

Malls Under Pressure as More Stores Close



Strong retail numbers last year from department stores Macy’s Inc. and Nordstrom Inc. raised hopes that the beleaguered mall industry would finally rebound. But recent developments this year are pointing to more trouble ahead, the Wall Street Journal reported. A number of struggling retailers are closing stores and being more selective about where to open ones, dimming prospects for many mall owners and investors. U.S. retailers have already closed 5,994 stores so far this year, compared with 5,864 closures for all of last year, according to Coresight Research. The net store closings, or the number of closings minus openings this year, stands at 3,353. Payless ShoeSource Inc., Gymboree Group Inc. and Charlotte Russe Holding Inc. are among the retailers to announce plans to close stores after earlier attempts at restructuring failed. An unexpected rebound in brick-and-mortar stores last year suggested that malls might enjoy a bit of a comeback, too. Consumer spending was strong, and shopping centers benefited from the expansion of beauty chains like Sephora and Ulta. Macy’s and Nordstrom made new investments in their stores to create a more appealing experience for shoppers. But retail sales have slipped more recently, falling 0.2 percent in February from a month earlier after gaining 0.7 percent in January. Retail sales fell 1.2 percent in December. The mortgage for Destiny USA, one of the largest malls in the country, was recently moved to a special servicer that deals with defaults or renegotiations of loan terms. The servicer said that it expects the mall owner, Pyramid Management Group, to default when the mortgage is due in June. (Subscription required.)







Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store.

Commentary: Fed Should Buy Muni Bonds to Fight the Next Recession



U.S. state governments suffered major damage from the last recession 10 years ago. During the second quarter of 2009, the final months of the downturn, personal income taxes tumbled 27 percent from a year earlier. At the same time, expenses grew as enrollment for Medicaid and state unemployment insurance soared, while crumbling asset prices suddenly left public pension systems with massive shortfalls relative to their liabilities. Over the past decade, the slow-but-steady economic expansion has covered up these issues but hasn’t erased them, according to a Bloomberg commentary today. State government employment remains below its pre-financial crisis peak. Public pension plans are still largely in a sea of red ink, with an overall shortfall of $1.4 trillion at the state level, and even those with an acceptable level of assets are just one bear market away from the brink. And it’s no secret that the U.S. has fallen terribly behind in funding its roads, bridges, airports and public transit systems, according to the commentary. As the Federal Reserve contemplates what the next recession might look like, and what tools it has available to combat it, the fiscal health of U.S. states is likely to emerge as a significant roadblock to any economic recovery. The easy answer would be directing more cash from the federal government to the states, according to the commentary. But the 2009 stimulus program already transferred an unprecedented amount of money into state coffers, and the results were middling at best. In the current political climate, and with U.S. deficits already running close to $1 trillion, it’s anyone’s guess whether a similar package could come together. That means it might be up to the Fed to get involved in the $3.8 trillion municipal-bond market to give states a much-needed boost, according to the commentary. The central bank can only do so much during a downturn to get companies and individuals to borrow. But by directly backing states, it will immediately allow them to make payroll, start on new infrastructure projects, or both.

CTreasury Issues Rules on Tax Breaks for Opportunity Zones



The Trump administration released regulations yesterday that could help venture capitalists, Native American tribes and entrepreneurs benefit from a new tax incentive meant to encourage investment in struggling communities, the New York Times reported. Backers of that incentive, known as Opportunity Zones, had complained to the administration in recent weeks that its regulations could end up steering most of that money into real estate development rather than to start-up businesses that are more likely to create well-paying jobs. The rules released yesterday appeared to ease many of those fears. But critics said that the administration had not done enough to make sure that the program achieved its goals. Under the 169-page proposed regulation, the second in a series of rules meant to clarify the 2017 tax law that created the zones, investors can take advantage of the tax breaks in several ways. The new methods are particularly important for investors who hope to fund new coffee shops, grocery stores or possibly, as administration officials conceded yesterday, marijuana dispensaries in states that have legalized the drug.

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!