SOFI Stock Pops Into Focus on Student Loan Moratorium News

SoFi Technologies (NASDAQ:SOFI) stock is trending lower on expectations that President Joe Biden will extend the moratorium on student loan repayments past the current May 1 deadline.

the Social Finance (SoFi stock) logo is displayed on a smartphone.
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Student loans continue to comprise a big part of San Francisco-based SoFi’s business. News that students will not have to repay those loans under a moratorium from the federal government during the Covid-19 pandemic is bad news for SoFi and other lenders.

SOFI stock is down 4% today, bringing its decline over the past week to nearly 10%. At its current level of $8.76 a share, SoFi’s stock is now down 45% over the past six months.

What Happened With SOFI Stock

Media reports say that the Biden administration is set to announce that it will extend the current moratorium on student loan repayments to Aug. 31 of this year. The repayment freeze had been scheduled to expire on May 1. Such an announcement today would mark Biden’s third extension of the expiration date.

Student loan balances have effectively been frozen for more than two years, with no required payments on federal student loans since March 2020. Over the last two years, interest has also stopped accumulating. Collections on loans that are in default are also on hold.

Why It Matters

While good news for current students and graduates who carry outstanding student loan debt, the moratorium has been difficult for lenders such as SoFi. The company issued more than $6 billion in new student loans in both 2018 and 2019, before the pandemic.

Student lending accounted for nearly 60% of all loans made by SoFi before Covid-19 disrupted its business. The amount of new student loans issued by SoFi fell to $4.8 billion in 2020 when the moratorium was first enacted. The negative impact on a key business line for SoFi has hurt the company and its share price.

The crimp in SoFi’s student loan business also comes as the company moves to become a chartered bank in the U.S. Earlier this year, SoFi received regulatory approval to become a bank holding company and acquire Golden Pacific Bank, paving the way for it to become a full-fledged bank and increasing the products it can offer consumers and businesses.

What’s Next for SoFi

Biden is expected to announce the extension later today. Look for SOFI stock to continue trending lower once the announcement is made. In time, SoFi should be able to diversify its business and lessen its reliance on student loans. But in the near term, the student loan moratorium will continue to drag on the company and its stock.

On the date of publication, Joel Baglole 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.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


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