In a Reversal, the Education Dept. Is Excluding Millions from Student Loan Relief​​​

In a remarkable reversal that will affect the fortunes of millions of student loan borrowers, the U.S. Department of Education has quietly changed its guidance around who qualifies for President Biden's sweeping student debt relief plan, NPR.org reported. At the center of the change are borrowers who took out federal student loans many years ago, both Perkins loans and Federal Family Education Loans. FFEL loans, issued and managed by private banks but guaranteed by the federal government, were once the mainstay of the federal student loan program until the FFEL program ended in 2010. Today, according to federal data, more than 4 million borrowers still have commercially-held FFEL loans. Until Thursday, the department's own website advised these borrowers that they could consolidate these loans into federal Direct Loans and thereby qualify for relief under Biden's debt cancellation program. On Thursday, though, the department quietly changed that language. The guidance now says, "As of Sept. 29, 2022, borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans." It's unclear why the department reversed its decision on allowing FFEL borrowers with commercially-held loans to consolidate and then qualify for debt relief. Multiple legal experts tell NPR the reversal in policy was likely made out of concern that the private banks that manage old FFEL loans could potentially file lawsuits to stop the debt relief, arguing that Biden's plan would cause them financial harm. Read more.

In related news, the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law postponed a hearing today that was to be focused on the recently reintroduced Consumer Bankruptcy Reform Act (CBRA). The legislation was reintroduced in the Senate and House yesterday by Sen. Elizabeth Warren (D-Mass.) and House Judiciary Committee Chairman Jerrold Nadler (D-N.Y.), and it proposes to simplify and modernize the consumer bankruptcy system, and make it easier for consumer debtors to file for relief. For more information on the legislation, please click here. Updates on the House Judiciary Committee rescheduling the hearing will be provided in the ABI Daily Headlines e-mail.

U.S. Weekly Jobless Claims Fall to Five-Month Low​​​

The number of Americans filing new claims for unemployment benefits fell to a five-month low last week as the labor market remains resilient despite rising headwinds from the Federal Reserve's interest rate increases and slowing demand, Reuters reported. The weekly unemployment claims report from the Labor Department on Thursday also showed jobless rolls shrinking to their lowest level in just over two months in mid-September. Initial claims for state unemployment benefits decreased 16,000 to a seasonally adjusted 193,000 for the week ended Sept. 24, the lowest level since April. Data for the prior week was revised to show 4,000 fewer applications filed than previously reported. Economists polled by Reuters had forecast 215,000 applications for the latest week. The claims report showed the number of people receiving benefits after an initial week of aid fell 29,000 to 1.347 million in the week ending Sept. 17, the lowest level since July. The so-called continuing claims data, a proxy for hiring, covered the week that the government surveyed households for August's unemployment rate. Continuing claims dropped by 65,000 between the July and August survey periods. The unemployment rate rose to 3.7% in August from 3.5% in July.
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Analysis: Inflation Has Hit Tenants Hard. What About Their Landlords?​​​

Of all the categories driving inflation in recent months, among the largest — and most persistent — is rent, according to a New York Times analysis. In buildings with more than 50 units, tenants in one-bedroom apartments have been handed new leases costing about 17 percent more on average than they did in March 2020, according to CoStar Group, a Washington-based real estate data company. The Labor Department’s rent indicator — which includes ongoing leases, not just renewals — has steadily risen, to 6.7 percent last month over the previous August. But while tenants absorb rent increases that often exceed their income gains, are landlords really making more money? It depends on the landlord. Publicly traded owners of sprawling real estate portfolios, like Invitation Homes, have enjoyed some of their best returns over the past few quarters. Things look very different, however, for Neal Verma, whose company manages 6,000 apartments in the Houston area. Earlier this year, Mr. Verma experimented with raising rents enough to cover the cost of spiking wages, property taxes, insurance and maintenance. Turnover doubled in the properties where he tried it, as people left for nearby buildings. Overall, the ferocious run-up in rents has been driven by tenants’ desire for more space and location flexibility created by remote work, rising interest rates that have locked would-be buyers out of the for-sale market, and cost increases on delayed maintenance. But the one factor landlords track most closely is their customers’ ability to absorb higher rents. Higher-earning tenants, who flock to newer buildings with more amenities, have been more willing to accept rent increases. Low-income renters, while seeing faster wage growth, have borne the brunt of higher prices for necessities like groceries and gasoline, and rents in older buildings are rising at a slower rate than in newer, nicer ones.
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Mortgage Rates Rise to 6.7%, Highest Since 2007​​​

Mortgage rates rose to their highest level in more than 15 years, a new post-crisis high that adds pressure to the already cooling U.S. housing market, the Wall Street Journal reported. The average rate on a 30-year fixed mortgage climbed to 6.7%, according to a survey of lenders released Thursday by Freddie Mac. lt is the highest rate since July 2007. A year ago, rates were 3.01%. The surge in mortgage rates follows a series of interest-rate increases from the Federal Reserve. The central bank has moved aggressively to try to cool the highest inflation in decades, raising its benchmark rate five times this year. Officials have indicated more increases are likely in the months ahead. (Subscription required.)
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Commentary: How McKinsey Got Into the Business of Addiction*​​​

When McKinsey & Company, the global consulting giant, sat down with executives of Juul Labs in late 2017, the vaping company was well on its way to becoming a sensation among teenagers eager to latch on to the latest fad — inhaling flavored, supercharged nicotine vapor. With grand ambitions, Juul needed marketing advice from McKinsey to help it on its way to a valuation greater than the Ford Motor Company, according to a commentary in the New York Times. For less than two years of work, McKinsey billed Juul $15 million to $17 million. But the client came with a reputational risk, and McKinsey preferred to keep the arrangement secret. Although its product was conceived as a way to help adults stop smoking, Juul stood accused of marketing nicotine to teenage nonsmokers, addicting a new generation in much the same way the cigarette industry hooked their parents. This month, several years after McKinsey took the company as a client, Juul agreed to pay $438.5 million to settle government investigations into its marketing practices, though it did not acknowledge wrongdoing in the settlement. McKinsey, which was not involved in the settlement, said that its work with Juul had focused on youth vaping prevention. That work was just the latest in a decades-long history of consulting for companies that sell addictive products. Last year, McKinsey agreed to pay more than $600 million to settle state investigations into its role in helping Purdue Pharma and other drugmakers fuel the opioid epidemic.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

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