• SoFi Technologies (SOFI) stock seems like a reasonable wager given its disruptive potential.
• However, the student debt moratorium extension is only the beginning.
• It’s better to think carefully about this discount.

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Although its most-ardent supporters have consistently supported the bullish case for SoFi Technologies (NASDAQ:SOFI), shares continue to stumble, likely because the core headwinds only represent the beginning of the troubles. Sure, the present discount in SOFI stock is appealing because of the underlying financial technology (fintech) business. But the longer-term fundamentals leave much to be desired.

To be fair, a significant danger exists in being cautious (or outright bearish) against an investment like SOFI stock. As a growth play tied to relevant, exciting and potentially game-changing innovations, SoFi could easily swing higher on positive news just as much as it has cratered on the negative print. As well, you can make the argument that shares are on discount.

Let’s back up for a moment. According to a TipRanks article, President Joe Biden recently “extended the federal student loan payment moratorium until the end of August (from the prior May 1). As a big chunk of SOFI’s revenue is derived from the refinancing of educational debt, following the news, the company lowered its [fiscal year 2022] guide.”

That’s going to hit SOFI stock where it hurts, particularly because so much of its total lending volume is dedicated to student loans. Therefore, a downward readjustment is necessary. Still, with college education being the key to success, doesn’t SOFI represent a speculative opportunity?

Maybe not quite and here’s why.

SOFI Stock and the Inflation Problem

In 2021, SoFi’s total lending volume amounted to $12.7 billion. Of that figure, $4.29 billion or 34% was attributed to student loans. Naturally, any kind of moratorium extension for this critical revenue stream would be problematic for the fintech firm, thus leading to volatility for SOFI stock.

Probably, even SoFi’s most vocal supporters will concede that the student debt extension is an issue for the company in the near term. However, the bullish contention is that SOFI stock has already priced in this piece of bad news. Moving forward — as the markets do — investors will consider the longer-term narrative, which they presumably believe to be encouraging.

However, I have a different take. Primarily, one of the biggest impediments to almost any business is soaring inflation. Unfortunately, this dynamic also adversely impacts college attendance. According to a CNBC report from a little more than one year ago, it stated that fewer young people are going to college due to exorbitant costs.

Here’s the issue. “Even before the pandemic, families were starting to question the return on investment, said Jeremy Wheaton, ECMC Group’s president and CEO.” Per Wheaton, “There is going to be a reckoning here.”

Now, if a reckoning is so damaging to SOFI stock today, what will even more inflation — caused by the rumblings of Russia’s invasion of Ukraine — do to shares?

The Worrying Balance of the Lending Profile

As mentioned above, 2021’s lending volume came out to $12.7 billion, which represents an almost 31% lift from the year ago tally. Further, the result in 2021 exceeds that of 2019 — obviously the year before the pandemic — by a magnitude of 13%. So far, so good.

Except here’s the other issue for SOFI stock. The student loan tally, whether in 2021 ($4.29 billion) or in 2020 ($4.93 billion), was significantly below that of the 2019’s haul of $6.7 billion. Therefore, if inflation continues to discourage students from attending higher education — and the data suggests this is the case — then SoFi could see a permanently reduced total lending volume.

It’s not just about student loans, though. For instance, personal loans may have spiked up to nearly $5.4 billion in 2021 compared to $3.73 billion in 2019. But this dramatic difference in magnitude suggests that a good portion of this debt could turn out to be bad debt; that is, these could be loans that households had to take out to stay afloat.

What if we have a recession? Multiple institutions are ringing the warning bell. That would really turn personal debt into bad debt.

And yes, home loans did spike from $798 million in 2019 to nearly $3 billion in 2021. But really, how sustainable is this sector when price spikes are causing sharp consumer behavioral shifts everywhere?

It’s Okay to be Skeptical

I think one of the myths that pervade the youth-centric investment forums is that a significantly discounted equity unit must rise higher. In some cases, it’s true, whether from a dead-cat bounce, an exhaustion of bearish activity or a genuinely positive news item. But in other cases, deflated shares can deflate even further.

I’m not suggesting that will be the outcome for SOFI stock. However, I think it’s worthwhile to be careful, even skeptical about the fintech firm. Yes, it’s tempting to jump into something that has been cheapened by over 55% during the trailing year. But there also might be a reason for that.

On the date of publication, Josh Enomoto 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.