President Joe Biden extended the suspension of federal student loan payments on April 6 for the sixth time in two years. If you own shares of SoFi Technologies (NASDAQ:SOFI), you probably were expecting as much from the White House. However, if you don’t own SOFI stock, the news gives you an opportunity to buy some for less.
SoFi CEO Anthony Noto has already said that the extensions won’t hurt SoFi’s business too much but will affect a student’s ability to make decisions about their academic careers. That’s unfortunate.
However, as this news relates to SoFi, nothing has changed regarding its future. This issue will pass. It’s a non-starter if you’re bullish about SOFI stock.
The Biden Administration argues that not extending the pause through August 31 would financially destabilize borrowers at a time when they’re just getting back on their feet. According to the Federal Reserve Bank of New York, approximately $7.5 billion in loan payments have been waived on a monthly basis over the past two years. Most of the cash from these paused payments is sitting in bank accounts across the country or already spent on discretionary purchases.
However, as Noto said in a March blog post, 98.9% of its borrowers are making their payments on time, which suggests just 1.1% aren’t keeping up. That’s down from 15% in March 2020. The economy is healthy.
In the fourth quarter ended Dec. 31, 2021, SoFi originated $1.46 billion in student loans. That was up 51% from a year earlier. In 2021, loan originations fell by 13% to $4.29 billion. It’s clear that SoFi’s student loan business accelerated greatly in the second half of last year.
As I stated in March, the company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) have gone from a loss of $149.2 million in 2019 to a $30.2 million profit in 2021.
It now generates six different revenue streams, including student loans. SoFi’s diversified business model will withstand this latest extension as it has the past five. So current shareholders shouldn’t worry about the noise caused by Biden’s latest announcement.
I continue to believe that aggressive investors ought to be buying SOFI stock for under $10. I said so in early March when it was trading around $9.40. Down almost 7% as I write this, you can pick up shares for a buck less.
This is good news if you’re looking to buy some or add more. It’s a non-event.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
