Dear SOFI Stock Fans, Mark Your Calendars for Aug. 31

  • The Biden administration has proposed new changes to federal student loans.
  • Meanwhile, the student loan forbearance period is set to expire on Aug. 31.
  • Shares of SoFi (SOFI) stock are down over 55% year-to-date.
SOFI stock - Dear SOFI Stock Fans, Mark Your Calendars for Aug. 31

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SoFi (NASDAQ:SOFI) stock is in the spotlight after the Biden administration proposed new changes to the student loan system. Federal student loans were first frozen in March 2020 as the Covid-19 pandemic ravaged the economy, taking borrowers by surprise. Since then, the forbearance period has been extended six times, with the current deadline set for Aug. 31.

In the U.S., there are 43.4 million student loan holders who collectively owe $1.75 trillion of debt. The majority of these borrowers have made zero payments during the forbearance period. In a survey conducted in April, half of borrowers stated that they would not be able to make a single payment if they had to.

SoFI CEO Anthony Noto supports loan reductions for those in “severe hardship.” The CEO believes that “distressed and defaulted borrowers” should receive a $10,000 loan forgiveness. On the other hand, the “affluent and capable” should go back to repaying their debts. The student loan forbearance extensions and the prospect of a $10,000 student loan forgiveness have also “taken SoFi’s student loan originations back below 50% of pre-Covid levels.”

During the first quarter of 2022, student loans accounted for 29.6% of SoFi’s total origination volume. The average student loan balance on SoFi’s platform was $49,297. Additionally, SoFi expects the student loan forbearance period to extend beyond Aug. 31 and reflected this in its guidance.

Now, the Biden administration is proposing a series of changes concerning student loan policies. Let’s get into the details.

SOFI Stock: Student Loan Forbearance Period Set to Expire

First, the new changes push for government workers and those working in specific nonprofits to have their debts cancelled after ten years. Borrowers who are currently in specific periods of forbearance or deferment could have that time counted towards the ten years. These periods do not currently qualify towards forgiveness. In addition, late payments would qualify towards a borrower’s total qualifying payments.

Next, students who attended dishonest or manipulative for-profit schools can be considered for debt forgiveness as a group. This would ultimately simplify the debt forgiveness process on the individual level. Furthermore, these borrowers would also have more time to file debt cancellation requests. On top of that, the definition of misconduct by schools would also widen to “aggressive and deceptive recruitment practices.”

Finally, the process of how interest accrues would change as well. Accrued interest on top of the principal would be cancelled in cases when a borrower exits forbearance or defaults on a loan.

The general public has 30 days to comment on the proposed changes. If successful, the proposals would go into effect no later than July 1, 2023.

When running for president, Biden expressed his support for a student loan cancellation of $10,000 per borrower. This would ultimately cost a staggering $321 billion and cancel out student loans for about a third of borrowers. He has since stated that he is waiting for Congress to provide the debt relief.

On the date of publication, Eddie Pan did not hold (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.


Article printed from InvestorPlace Media, https://investorplace.com/2022/07/dear-sofi-stock-fans-mark-your-calendars-for-aug-31/.

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