SoFi, a lender that refinances student loans and lends money to eligible borrowers at lower interest rates, has filed a lawsuit against the Biden admin. Established in 2011, SoFi’s services have been extended to most colleges and helped over 450,000 borrowers refinance more than $30 billion worth of student loans.
However, due to the ongoing payment pause on federal student loans that was initially implemented during the Covid-19 pandemic but subsequently extended eight times, SoFi’s business has been hit hard financially.
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SoFi says the last extension is unlawful
In its legal complaint, SoFi argues that the last extension Biden granted in November last year is different and unlawful – partly because the Biden administration tied the restart date to pending litigation over its proposed student loan forgiveness program, which is now before the US Supreme Court.
Currently, payments are set to resume 60 days after the Supreme Court issues its ruling or in late August – whichever comes first. “Unlike the other extensions, the Department of Education did not claim that continuing the moratorium was necessary to address harm caused to borrowers affected by the pandemic,” reads SoFi’s complaint, which was filed in a federal district court in Washington, DC.
“Instead, the Department asserted that the further extension was intended to alleviate ‘uncertainty’ for borrowers during the pendency of ongoing litigation regarding the debt-cancellation program,” the complaint continues.
SoFi is in for significant losses
SoFi is projecting they could lose between $25 to $30 million if this current pause on student loans continues through August.
In its statement to CNN, SoFi said, “We have supported and continue to support targeted student loan forgiveness, in addition to the student loan payment moratorium during the economic crisis at the height of the Covid-19 pandemic. However, it’s time for the administration to follow through on its word to end the federal student loan payment moratorium”.
Furthermore, during the pandemic – the government has also pegged the interest rate for student loan borrowers at 0%. Hence, there has been no incentive for many borrowers to refinance their loans with SoFi, further detracting from possible revenue from the company.
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