Why SOFI Stock Will Be a Winner of Biden’s Student Loan Forgiveness Plans

  • Student debt forgiveness has led to complications for the personal finance market.
  • But according to one expert, it is about to give rise to a significant opportunity.
  • SoFi (SOFI) is the company best-positioned to take advantage of this new trend.
"SOFI stock" - Why SOFI Stock Will Be a Winner of Biden’s Student Loan Forgiveness Plans

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SoFi Technologies (NASDAQ:SOFI) stock has made plenty of investors nervous lately. The fintech startup caught Wall Street’s eye after demonstrating impressive growth in early 2022. But as student loan repayment pauses have continued, companies in the loan-refinancing space have faced considerable turbulence. For SOFI stock, this has meant a complicated year spent mostly in the red.

On Aug. 24, the White House announced a one-time student loan forgiveness plan, targeting lower-income and middle-income borrowers. The policy meant $20,000 in student debt relief for Pell Grant recipients and $10,000 for other borrowers. It does not apply to borrowers with annual incomes over $125,000. Additionally, President Joe Biden’s administration extended the current moratorium on student loan payments through January 2023. For companies like SoFi, this is hardly welcome news. But according to one expert, what seemed like a bad turn may be about to give rise to a valuable new market opportunity.

A New Market for SOFI Stock

Mark Kantrowitz is a nationally recognized student loan expert and the president of PrivateStudentLoans.guru, noted for his insights on lending and personal finance. As he sees it, companies like SoFi will have a unique growth opportunity in the coming months as borrowers get ready to resume payments. As he notes:

“Lenders of private student loans are likely to see a rush of applications for private refinance soon after the forgiveness application becomes available, and these borrowers will involve a better quality mix. Borrowers know that the Federal Reserve Board has been raising interest rates, and they want to lock in a low fixed interest rate before interest rates rise too much.”

Why will there be a rush of activity for companies in the private refinancing space? As Kantrowitz sees it, it makes sense to apply for loan forgiveness sooner than the Dec. 31, 2023 deadline. “If a borrower wants to receive forgiveness by the restart of repayment, they need to apply for forgiveness by November 15, 2022,” he tells InvestorPlace. The application becomes available in October 2022, and Kantrowitz thinks borrowers should apply as soon as it does. If borrowers follow this advice, it will certainly generate the type of rush that could sent SOFI stock shooting up.

Examining the market landscape through a macro lens, Kantrowitz laid out what it will look like after the plan takes effect. He noted that there will be two groups of borrowers left: those with large student loan balances and those who did not qualify for forgiveness due to their high incomes. The first group is likely comprised of people with graduate degrees, such as doctors and lawyers. Kantrowitz concluded that “both represent good prospects for private refi.” By that logic, SoFi will have to district groups looking to take advantage of its private-loan-refinancing services.

What Comes Next

Of course, there may be obstacles. As of now, a lawsuit is currently circulating in an attempt to stop President Biden’s policy from going through. But Kantrowitz recently made the argument that these legal challenges could easily backfire, describing the plan as a “‘heads I win, tails you lose’ scenario for Democrats.” It is likely to be a lengthy process, and there is no guarantee the anti-forgiveness arguments will hold up.

InvestorPlace recently laid out how student loan forgiveness can benefit the economy. But according to Kantrowitz’s argument, it will even help the companies who were originally seen as the losers of the policy. SOFI stock has the rare opportunity to grow within the coming months ahead as consumer focus shifts to loan refinancing.

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.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/09/why-sofi-stock-will-be-a-winner-of-bidens-student-loan-forgiveness-plans/.

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