The extension of the student loan moratorium has pushed SoFi Technologies (NASDAQ:SOFI) stock down today. Loan repayments, previously set to resume on May 1, have now been paused until August. This is welcome news to the millions of Americans with student loan debt. However, for the personal finance company, it’s a little more grim. SOFI stock was already struggling as Americans took advantage of the policy. Now, this continued payment pause further compromises one of its revenue sources.
What’s Happening With SOFI Stock
SOFI stock has been slipping this week amid moratorium speculation. It began slipping yesterday, and since the extension was confirmed, it has not stopped. As of this writing, shares are down 3.3% for the day and are not showing signs of a rebound. Despite a slight rally late yesterday, they have fallen 12% since.
Why It Matters
For a company that profits when consumers refinance their loans, this extended pause is bad news. As InvestorPlace writer William White reports, “without the requirement to repay federal student loans, borrowers are unlikely to seek it out for refinancing.”
The student loan moratorium has rendered SOFI stock a loser of the late pandemic era. While shares rose throughout the first half of 2021, the months since have seen them fall from almost $23 per share to the current price of $8.78. That doesn’t paint a reassuring picture for investors, and it isn’t likely to continue for the next few months. While the analyst rating consensus on TipRanks is that SOFI stock is a moderate buy, it is still well below the average price target of $16.50 per share.
Is this a buy-the-dip opportunity for SOFI stock? Some contrarian investors may see it that way. However, it’s hard to ignore the fact that student loan payments have been paused already multiple times. There’s no reason to expect that we won’t see the pattern repeat in August.
Mid-term elections are coming up, and Democrats will need ways to increase voter turnout. Pausing student loan payments are an effective way of appealing to young voters, an absolutely key demographic. Some politicians have pushed for student loan forgiveness. While that will be a harder policy to enact, extending the moratorium is easy and convenient.
The chances that payments will remain paused through November is not beyond the realm of possibility. Investors know it, and they are likely to jump ship before SOFI stock sinks even more.
What It Means
It doesn’t even stop there. InvestorPlace contributor Josh Enomoto recently speculated that SoFi won’t be able to take advantage of the housing shortage because it doesn’t exist. If that is true, SOFI stock is likely to suffer even more over the next few months, if not beyond.
As of now, the future is too uncertain for a bullish play on SOFI stock. The general momentum surrounding the personal finance section of the financial services sector hasn’t been great in general. Companies like NerdWallet (NASDAQ:NRDS) are also struggling. However, SoFi has proven it is ill-equipped to weather the storm caused by student loan industry headwinds.
As InvestorPlace contributor Ian Bezek noted recently, real world forces are overpowering SoFi’s attempts at a turnaround. That was last month, and things have only gotten worse for SOFI stock since then.
On the date of publication, Samuel O’Brient 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.
