SoFi (NASDAQ:SOFI) stock opened higher by about 7% today after President Joe Biden and House Speaker Kevin McCarthy agreed to put the debt limit on hold until January 2025. In addition, the agreement stipulates that student loan payments will resume 60 days after June 30, or on Aug. 29. Now, Congress will have to approve the deal before it is put into effect. SOFI stock investors can expect to hear the House’s decision by as soon as Wednesday.
“What the president did, he went unconstitutionally and said he was going to waive certain people part of their debt for student loan[s], but then he paused everybody’s student loan,” said McCarthy. “So everybody who borrowed a student loan within 60 days of the signing is going to have to pay that back.”
SoFi itself has fought a long battle to resume student loan payments. Let’s get into the details.
Why Is SOFI Stock Up Today?
Student loans reflect a major aspect of SoFi’s business. During the first quarter, student loan origination volume accounted for 14.7% of SoFi’s total origination volume. The remaining 85.3% of origination volume was attributed to personal and home loans. However, student loan origination volume fell by 47% year-over-year (YOY) during Q1, mainly due to the student loan moratorium.
“First quarter student loan volume of over $525 million was down more than 50% from the average pre-pandemic volume as the moratorium on federal student loan payments continues to weigh on the business,” the company explained in its earnings report. SoFi’s average loan balance of student loans is $46,106, compared to $25,008 for personal and $283,579 for home.
SoFi and CEO Anthony Noto had previously voiced their concerns to get the ball rolling on payments again. In March 2022, Noto penned a letter to Biden, advocating for a resumption of payments for the “affluent and capable” and $10,000 in student loan forgiveness for the “distressed and defaulted borrowers.”
“It’s time for Washington to show up for student borrowers by helping those who need the most assistance, preparing those who can go back into repayment, and giving concrete information to those who are looking to join the system for the first time,” said Noto.
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.