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SoFi Technologies stock has fallen 24% over the past year.
Gabby Jones/Bloomberg
The debt-ceiling agreement struck over the weekend would reinstate government student loan repayments, which have been halted for more than three years. That should benefit the online personal finance company
SoFi Technologies
(SOFI), which refinances student loans.
President Joe Biden and House Speaker Kevin McCarthy reached a deal on the debt ceiling issue on Saturday, cutting it dangerously close to the June 5 deadline—the so-called “X date” by which the government would be unable to pay all of its bills on time.
Details of the agreement released in a 99-page bill Sunday include a clause to officially end the existing pause in student loan repayments by August 29. The government implemented the pause in March 2020 to address the financial impact of the Covid-19 pandemic, giving more than 40 million borrowers some breathing room. The moratorium on student loan repayments has been extended several times since then.
Investors are likely feeling more optimistic about the road ahead for SoFi, as resumed student loan payments should help its refinancing business pick back up. SoFi stock jumped 6.7% to $5.77 in recent Tuesday trading.
SoFi’s student loan originations business has collapsed in recent years. The company generated $525 million in student loan origination in the 2023 first quarter, compared with $2.4 billion in the fourth quarter of 2019, just before the pandemic’s onset. The student loan refinancing company filed a federal lawsuit in March, calling the government’s move to extend the student loan pause “unlawful.”
The current draft of the bill prohibits another extension but makes no mention of Biden’s roughly $400 billion student loan forgiveness plan. The Supreme Court is expected to rule on the debt relief program by the end of June, according to the Education Department.
SoFi issues student, home, and personal loans to consumers but it also securitizes and sells those loans to investors. The stock took a hit earlier this month after earnings report showed SoFi didn’t sell any loans within its personal loan and student loan refinancing segments in the first quarter—suggesting softening investor demand. SoFi stock has fallen 24% over the past year.
Write to Karishma Vanjani at [email protected]
Source: https://www.barrons.com/articles/sofi-stock-price-student-loans-8f69f12f?siteid=yhoof2&yptr=yahoo