Shares of SoFi (NASDAQ:SOFI) stock are in focus after the announcement that the Supreme Court struck down President Joe Biden’s student debt forgiveness plan. The plan sought to cancel $20,000 of student loan debt for Pell Grant recipients and $10,000 for borrowers earning less than $125,000 per year.
In addition, the plan was estimated to cost $430 billion across 26 million approved borrowers out of 40 million total. The Supreme Court ruled 6-3 in favor of blocking the plan, citing that Biden had overstepped his constitutional power and needed the approval of Congress.
During the first quarter, SoFi’s student loan origination volume totaled $525 million, representing about 15% of its overall origination volume. The $525 million represents a decline of over 50% compared to the average pre-pandemic volume, which was a result of the federal student loan moratorium.
SOFI Stock: SCOTUS Blocks Biden’s Student Loan Relief Plan
Secretary of Education Miguel Cardona had previously argued that the Heroes Act of 2003 granted him the power to cancel $430 billion in student loans. The act arguably gives Cardona the power to change the federal student loan system during times of national emergency. Chief Justice John Roberts countered back, explaining that the act “allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up.”
This decision comes as as major blow to Biden, as his election campaign touted student debt cancellations. Following the decision, the White House announced that Biden was “not done fighting yet,” and would have more to say later today.
Shares of SOFI stock initially spiked about 5% higher on the news but have since fallen to the negative. It’s worth mentioning that the personal finance company has jumped higher by over 85% this year, receiving a major boost from the decision to resume student loan payments in October.
Meanwhile, Politico reported that the Education Department has finalized a “safety net period” for borrowers. The safety net will provide borrowers with a 90-day grace period following the resumption of payments in the case of missed payments. Any missed payments will be placed on forbearance and will not negatively affect credit ratings.
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.
