SOFI Stock Fans Should Brace for a Big Student Loan Update

  • The Biden administration will announce whether or not the student loan moratorium will be extended this week.
  • During Q2, student loans accounted for 38.44% of SoFi’s (SOFI) lending products.
  • Shares of SOFI stock are down more than 55% year-to-date.
SOFI stock - SOFI Stock Fans Should Brace for a Big Student Loan Update

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Shares of SoFi (NASDAQ:SOFI) stock are in focus after Education Secretary Miguel Cardona stated that the Biden administration’s decision on whether to extend the student loan moratorium will be announced this week. The current deadline for the moratorium falls on Aug. 31 and was first enacted during the midst of the coronavirus pandemic in March of 2020.

Over the weekend, Cardona explained, “We know Aug. 31 is a date that many people are waiting to hear something from. We’ve been talking daily about this, and I can tell you the American people will hear within the next week or so.”

During Q2, student loans made up 38.44% of SoFi’s total lending products. Besides student loans, SoFi also offers home and personal loans. Furthermore, student loans accounted for 12.44% of the company’s total origination volume, although the volume declined by 54% year-over-year. On top of that, Q2 student loan volume was down to 25% of the average pre-pandemic volume due to the effects of the moratorium.

As a result, a seventh extension of the moratorium would not be beneficial for SoFi’s loan business.

SOFI Stock: Student Loan Moratorium Decision Coming This Week

Student debt across the country is estimated to total $1.7 trillion among 45 million borrowers. Meanwhile, the average SoFi student loan borrower has an average loan balance of $48,474.

There is also speculation that President Joe Biden may forgive $10,000 of student debt per borrower, although this has not been confirmed. Biden has already thrown out $32 billion of student debt for over 1.6 million borrowers, although most of the debt is attributed to defrauded students or through the Public Service Loan Forgiveness (PLSF) program. The PLSF program forgives debt for public service workers or people working other qualifying jobs.

It’s likely that Biden will extend the moratorium. In addition, the Education Department has already notified student loan providers to not send student loan bills to borrowers. If extended, the deadline will likely fall past the Nov. 8 midterm elections. Forbes reports that a “logical deadline” would fall on Dec. 31 or Jan. 31 of next year.

However, former Treasury Secretary Larry Summers is against an extension. He cautioned that student loan debt relief would contribute to inflation and encourage student tuition hikes, adding, “Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college. Student loan debt relief is spending that raises demand and increases inflation.”

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.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.


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