What an Extended Student Loan Repayment Freeze Means for SOFI Stock

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Yesterday, President Joe Biden surprised the nation and SoFi (NASDAQ:SOFI) shareholders by announcing an eighth extension of the federal student loan moratorium. The moratorium was previously set to end on December 31 and payments were expected to resume the next day. The pause was originally implemented in March 2020, at the height of the coronavirus pandemic. That’s significant for SoFi, as the company pulled in 13% of its third-quarter origination volume from student loans.

SoFi added in its press release, “Third-quarter student loan volume of more than $457 million was down more than 50% from pre-pandemic average volume as the moratorium on loan repayments student loans continues to weigh on the business.”

Biden explained that he delayed the deadline due to ongoing litigation over his plan to forgive student debt. Earlier this month, a federal judge in Texas ruled Biden’s debt forgiveness plan of up to $20,000 unconstitutional after two people backed by a conservative advocacy group argued that the plan “doesn’t did not follow proper regulatory processes and was illegal”.

Stock SOFI: Biden extends federal student loan moratorium

The decision prompted the Department of Education to halt requests for student loan relief. This caused the Department of Justice to file an appeal with the 5th US Circuit Court of Appeals. A final court decision could take several months.

Biden is confident his plan respects the Constitution, tweeting, “I am confident our student debt relief plan is legal. But he’s on hold because Republican officials want to block him. »

Now, payments are expected to resume 60 days after the litigation ends and when Biden is allowed to resume his pardon plan. If the dispute is still ongoing as of June 30, 2023, payments will resume 60 days after that, August 29.

The eighth extension took SOFI stock to a new 52-week low of $4.57. If the delay is extended to Aug. 29, SoFi could experience nearly another three-quarters of the reduction in student loan activity. This would prove detrimental to the business and could result in a more difficult path to profitability.

At the date of publication, Eddie Pan did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publication guidelines.

Eddie Pan specializes in institutional investments and insider trading. He writes for InvestorPlace’s Today’s Market team, which focuses on the latest news on popular stocks.


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