SOFI Stock Gains With $400 Billion Student Debt Plans in Focus

  • SoFi (SOFI) stock is in focus today after the Congressional Budget Office released an estimate of the cost of the White House’s student-loan forgiveness program.
  • The loan-forgiveness plan may negatively impact SoFi’s results in the short term.
  • The termination of the moratorium on student-loan payments should be a positive catalyst for SoFi.
SOFI stock - SOFI Stock Gains With $400 Billion Student Debt Plans in Focus

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SoFi (NASDAQ:SOFI), which provides many student loans, is trending on social media today. SOFI stock is in focus today after the non-partisan Congressional Budget Office (CBO) estimated that President Joe Biden’s student-loan forgiveness plan would cost American taxpayers $400 billion over three decades.

Under Biden’s blueprint, Washington would reduce the amount owed by some recipients of student loans by $10,000-$20,000. Over 40 million citizens could be impacted by the initiative, the White House has stated.

The Potential Impact on SOFI Stock

The loan-forgiveness plan may negatively impact SoFi’s results, as the amount of the payments that the company will receive on the impacted loans will decline, while the value of the loans that are newly refinanced by borrowers will also decline.

On the other hand, however, the Biden administration announced in tandem with the loan forgiveness plan that the moratorium on payments on student loans would end as of January 2023.

In other words, shortly after the upcoming New Year, Americans with outstanding student loans will have to resume making payments on their loans, and some of these recipients will seek to refinance their loans with SoFi. As a result, the company’s revenue from student loans will jump starting in January.

An Analyst’s Take

On Sept. 14, Bank of America raised its rating on SOFI stock to “buy” from “neutral.” The firm expects SoFi’s financial results to be meaningfully boosted by the termination of the moratorium, which was first imposed at the beginning of the Covid-19 pandemic.

Bank of America also predicts that SoFi will get a lift from its “high-profile NFL-aligned marketing investments.”

SOFI stock has dropped 11% in the last month, and it has tumbled 67% this year. However, the stock is up almost 3% today.

On the date of publication, Larry Ramer 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 Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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