SOFI - SoFi sues Biden administration seeking to end student loan payment pause

2023-03-07 13:15:29 ET

SoFi Technologies' ( NASDAQ: SOFI ) bank subsidiary filed a lawsuit seeking to overturn President Joe Biden's last extension of the student loan payment pause, arguing that the moratorium has no legal basis and has cost the bank millions of dollars in profits.

SoFi's ( SOFI ) business in refinancing student loans has suffered as the payment pause negates the need to refinance such loans. The lawsuit asked the judge, at a minimum, to confine the pause only to borrowers who are eligible for Biden's debt forgiveness plan, the Associated Press reported.

The lender contends that this eighth extension of the moratorium was implemented not as a result of the pandemic, but to provide extra time while Biden's debt cancellation plan is considered by the Supreme Court, which is expected to rule in June.

The latest extension has cost SoFi ( SOFI ) Bank at least $6M in lost profits and could result in a total of $30M in losses if it continues through August, it said.

Meanwhile, the Department of Education described the lawsuit as "an attempt by a multi-billion-dollar company to make money while they force 45M borrowers back into repayment."

Equities have dropped broadly in Tuesday trading after Fed Chair Jerome Powell said the central bank is prepared to push interest rates higher than it previously expected if the data warrants. Sofi ( SOFI ) stock fell 1.4% in Tuesday afternoon trading; other student loan-related names also dropped: Navient ( NAVI ) -2.0%, Nelnet ( NNI ) -0.9% , and SLM Corp. ( SLM ) -1.6% .

In November 2022, the Biden administration extended the pause on federal student loan repayments to June 30, 2023, while it defends in court its ability to cancel portions of student debt. In August, President Biden unveiled his plan to forgive $10K of student debt for borrowers who earn less than $125K per year and up to $20K for Pell Grant recipients.

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