SoFi (NASDAQ:SOFI) stock is trading 6% higher today as investors await President Joe Biden’s decision to extend the federal student loan moratorium. The Wall Street Journal reports that Biden and his administration will make the announcement today.
During the second quarter, student loans accounted for 38.44% of SoFi’s total lending products and 12.44% of the company’s total loan origination volume. However, student loan volume has fallen to only 25% of the average pre-pandemic volume due to the ongoing moratorium. The current deadline for the student loan moratorium is Aug. 31.
Another extension for the moratorium would mark the seventh extension since payments were first pushed back in March 2020. According to people familiar with the discussions, Biden will likely extend the moratorium again. He may also forgive $10,000 of student debt per borrower for those making less than $125,000 a year. Still, the same sources cautioned that these figures could change. Per WSJ, a report released by the Penn Wharton Budget Model estimated that $10,000 debt forgiveness would cost around $300 billion.
SOFI Stock: Biden Expected to Announce Student Loan Decision
Meanwhile, Republicans are against a seventh extension. They claim it could worsen inflation and would not be fair to borrowers who have already paid off their debts. Earlier this month, senior Republicans penned a bill to end the moratorium. However, the bill is expected to fall short in a Democrat-controlled Congress and White House. Former Treasury Secretary Larry Summers also believes an extension could encourage college tuition hikes. Summers says the money spent on student debt relief could be used for better alternatives.
In a letter written to President Biden last May, SoFi CEO Anthony Noto expressed his support of a one-time $10,000 debt relief for “distressed and defaulted borrowers.” Noto also supported putting the “affluent and capable” back into repayment as soon as possible. The CEO acknowledged that $10,000 debt forgiveness could detrimentally affect SoFi, but believes it’s time to do the “harder, right thing.”
On the other hand, a large block of 29.95 million shares of SOFI stock was offered this morning for $6.10 per share. The seller is likely SoftBank (OTCMKTS:SFTBY), who has confirmed it plans on selling all or some of its position. After its last sale on Aug. 16, SoftBank’s ownership of the company fell below 5%. As a result, SoftBank is no longer required to disclose sales via a 13D filing. In the month of August, the company has disclosed the sale of 49.85 million shares of SOFI stock.
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.
