Commentary: The Aging Student Debtors of America*​​​

Americans aged 62 and older are the fastest-growing demographic of student borrowers, according to a commentary in the New Yorker. Of the 45 million Americans who hold student debt, one in five are more than 50 years old. Between 2004 and 2018, student loan balances for borrowers over 50 increased by 512 percent. Perhaps because policymakers have considered student debt as the burden of upwardly mobile young people, inaction has seemed a reasonable response, as if time itself will solve the problem. But in an era of declining wages and rising debt, Americans are not aging out of their student loans; they are aging into them, according to the commentary. Credit supposes that which we cannot afford today will be able to be paid back by tomorrow’s wealthier self — a self who is wealthier because of riches leveraged by these debts. Perhaps no form of credit better embodies the myth of a future, richer self than student loans. However, the surge of aging debtors calls into question the premise of education for human capital. Eroding union density, declining wages and skyrocketing tuition have all made college less a path to high-paying jobs than an escape hatch from the worst-paying ones. Those who have taken on debt are increasingly unable to pay it off; many haven’t even received diplomas. Older student debtors are not exceptional cases within the mounting student-debt crisis; their experiences are, in fact, indicative of its hallmark features, according to the commentary. Mounting interest, looming balances, faulty relief methods and declining wages all are forcing borrowers to carry loans for longer and longer, pushing student debt across generations. Older debtors shuffle their income between credit card bills, house payments and car loans; student debts, often the furthest from their day-to-day lives, get paid off last — or don’t get paid at all. For aging borrowers on declining incomes, the crisis is acute: Student debtors over age 65 default at the highest rates. In 2015, more than a third of borrowers in their age group defaulted on their educational loans. Read more. 

*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.

U.S. GDP Fell at 0.9% Annual Rate in Second Quarter; Recession Fears Loom over Economy​​​

The U.S. economy shrank for a second quarter in a row — a common definition of recession — as businesses trimmed their inventories, the housing market buckled under rising interest rates, and high inflation took steam out of consumer spending, the Wall Street Journal reported. Gross domestic product, a broad measure of the goods and services produced across the economy, fell at an inflation and seasonally adjusted annual rate of 0.9% in the second quarter, the Commerce Department said Thursday. That followed a 1.6% pace of contraction in the first three months of 2022. The report indicated the economy met a commonly used definition of recession: two straight quarters of declining economic output. The official arbiter of recessions in the U.S. is the National Bureau of Economic Research, which defines one as a significant decline in economic activity, spread across the economy for more than a few months. Its Business Cycle Dating Committee considers factors including employment, output, retail sales and household income — and it usually doesn’t make a recession determination until long after the fact. (Subscription required.) Read more. 

Corporate America Embraces Short-Term IOUs as Free Money Ends​​​

Blue-chip companies that need to borrow in the U.S. now are increasingly relying on commercial paper to avoid locking in longer-term borrowing costs in a market beset by turbulence, Bloomberg News reported. With the Federal Reserve's fresh rate hike yesterday, the days when blue-chip firms borrow super cheaply for decades are gone, at least for now. Corporate treasurers have instead been turning more to commercial paper, a type of unsecured debt that typically lasts 270 days or less. The total amount of these IOUs outstanding has mushroomed to nearly $1.2 trillion this year, up more than 20% from its lows in 2020, with computing giant Apple Inc. and pipeline-owner Kinder Morgan Inc. among those that have been dipping more into the market this year. At the same time, investment-grade companies are relying less on longer-term debt markets, with sales of high-grade corporate bonds dropping about 7% in 2022, according to data compiled by Bloomberg. If you strip out banks and other financial companies, sales of this kind of debt in the first half of this year were the lowest since at least 2016, according to BMO Capital Markets. Companies are essentially betting that the Fed will get inflation under control, and that longer-term rates will stabilize after rising for much of the year. Read more. 

Fewer Americans Applied for Jobless Benefits Last Week​​​

Fewer Americans applied for jobless benefits last week, but the previous week’s number was revised upward significantly, with claims breaching the 250,000 level in back-to-back weeks for the first time in more than eight months, the Associated Press reported. Applications for jobless aid for the week ending July 23 declined by 5,000 to 256,000 from the previous week’s 261,000, the Labor Department reported Thursday. The number of claims for the week of July 16 was revised upward by 10,000 from the previous estimate of 251,000. The four-week average for claims, which smooths out some of the week-to-week volatility, rose by 6,250 from the previous week, to 249,500. That number is also at its highest level since November of last year. The total number of Americans collecting jobless benefits for the week ending July 16 fell by 25,000 from the previous week, to 1,359,000. That figure has been near 50-year lows for months. Read more. 

Analysis: The Buy Now, Pay Later Juggernaut Is About to Be Tested​​​

The "buy now, pay later" (BNPL) option for purchases is now ubiquitous in Australia and fast approaching that status in the U.S. and Europe, accessible at the checkouts of hundreds of thousands of retailers online and off, Bloomberg Businessweek reported. It powered the ascendance of Afterpay, which attracted investments from Chinese tech giant Tencent Holdings Ltd. and U.S. investment firm Tiger Global Management LLC. (Digital payment company Block Inc. bought the company in January for $29 billion, making it the most valuable acquisition in Australian history.) The model has become the flagship product of BNPL companies. Lauded as a much-needed alternative (and threat) to credit cards and predatory lenders and criticized as a gateway drug to debt for the young and inexperienced, BNPL represents one of the biggest and fastest changes to consumer credit in decades. In the U.S., it took root in 2018 as a way to buy clothing, cosmetics and other discretionary items and exploded in popularity amid the pandemic. Companies such as Afterpay and its main competitors, Klarna and Affirm, often attribute their phenomenal growth to widespread distrust and dislike of credit cards, particularly among the under-40 set. Nevermind that this doesn’t comport with the data (a September study by TransUnion showed that BNPL users possess more credit cards than the general “credit active” population), the narrative has been repeated so many times it’s become practically gospel. But a deeper look into the pay-in-four model suggests some less facile explanations. Particularly in the U.S., BNPL companies haven’t been subject to much of the regulatory oversight normally applicable to entities extending credit. While the Truth in Lending Act, a landmark law enacted in 1968 and amended many times since, requires extensive disclosures for unsecured consumer loans split into payments of five or more, it doesn't for BNPL services. Shop online, and you’re bound to encounter offers from Afterpay, Klarna, or Affirm to let you split purchases of up to $2,500 into four installments. The arrangement is like layaway, but in reverse. Make your payments on time, and the pay-in-four model is all upside: You’ve borrowed money free of any interest. But fall behind on your payments, and you might get hit with late fees from the BNPL provider. Read more. 

Next Week at ABI’s 2022 Mid-Atlantic Bankruptcy Workshop: Coming Tsunami of Commercial Real Estate Restructurings, Supply Chain Disruptions, Cryptocurrency and More!​​​

Join ABI on Maryland’s Eastern Shore for family-friendly fun and networking in a relaxed atmosphere at the 2022 Mid-Atlantic Bankruptcy Workshop, being held Aug. 4-6, 2022. Our host hotel, the Four-Diamond Hyatt Regency Chesapeake Bay, is situated on 342 acres along the picturesque Choptank River and is an easy drive from Washington, D.C., Baltimore, Philadelphia and Wilmington, Del. Earn up to 8 hours of CLE/CPE credit, including 1.5 hours of ethics, from a stellar faculty of regional professionals and judges on business-, consumer- and skills-focused topics. Register today!

International Committee Seeking Nominations for the First Annual "Matter of the Year" by Sept. 15​​​

ABI's International Committee is proud to announce its First Annual International Committee Matter of the Year Award! The nominated matter needs to involve the U.S. and other jurisdictions and be of some international legal significance and/or impact to international insolvency, as well as international cooperation. Nominations are due September 15, 2022, by 5:00 PM EDT. For more information, visit the International Committee page.

USTP Seeking Applicants Interested in Serving as Subchapter V Trustees​​​

The U.S. Trustee Program is seeking resumes from persons wishing to be considered for inclusion in a pool of trustees who may be appointed on a case-by-case basis to administer cases filed under the Small Business Reorganization Act of 2019 (subchapter V), according to a release from the U.S. Department of Justice. Those with business, managerial, consulting, mediation and operational experience are encouraged to apply. The appointment is for cases filed in the U.S. Bankruptcy Court for the Western District of Michigan. Subchapter V trustees may receive compensation and reimbursement for expenses in each case in which they serve, pursuant to court order under 11 U.S.C. § 330. Trustees are not federal government employees. For additional information, qualification requirements and application procedures, click here.

Court Vacancy Announcements in South Carolina and E.D. Washington​​​

The following two court vacancies are listed below with links and application deadlines for each respective position:

- Chief Deputy Clerk (D. S.C.): (Application deadline Aug. 9)

- Clerk of Court (E.D. Wash.): (Application deadline Aug. 26)

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