Online bank SoFi (SOFI) says the latest student loan payment pause has cost it $6 million—and wants courts to stop the bleeding.
- SoFi is a California-based online bank that drives a significant amount of business from refinancing student loans.
- The company is suing the Department of Education, saying that the pause on student loan payments is making it difficult for them to compete with 0%, payment-optional loans.
- The suit is the latest in a string of legal challenges to President Joe Biden's plan to relieve student loan debt burdens.
The private bank filed a lawsuit late last week in Washington against the Department of Education, arguing that the pause on student loans is unlawful because the pandemic is no longer a threat to borrowers' finances.
The pause has been extended eight times since the onset of the pandemic, with the most recent extension set to allow time for the Supreme Court to rule on President Joe Biden's forgiveness plan.
“The eighth extension doesn't even attempt to redress harm from the pandemic at all, but rather to alleviate ‘uncertainty’ caused by the debt-cancellation litigation,” the bank said in its lawsuit, as reported by AP.
The student loan payment and interest pauses started on March 13, 2020, during the Donald Trump administration. Since then, student loan borrowers have seen the pause morph into a forgiveness plan under the Biden administration.
SoFi claims that if the pause is allowed to extend through August, as is currently the plan, the company could lose up to $30 million. The bank said in the suit that the losses are so high because borrowers with 0% interest and no payment requirements are not looking to refinance their loans, which is a substantial part of its business.
SoFi has asked that if the court doesn't end the pause, to at least limit it to the 40 million borrowers who are eligible for the cancellation plan.
This legal challenge to student loan debt programs is the latest in a string of lawsuits around the pause and forgiveness plan. The Biden administration is waiting for a ruling from the Supreme Court on whether or not the forgiveness plan is allowed to move forward.
If the plan is upheld, about 20 million borrowers would never have to make a payment again, because their balances would be wiped out. The remaining borrowers would have their monthly payments by about $63, data shows.
However, if the court strikes down forgiveness, borrowers would start repayments in a much different economic climate than when the pauses began. More student loan borrowers are behind on other debt than they were before the pandemic, according to research from the Consumer Financial Protection Bureau.