SoFi (NASDAQ:SOFI) stock is up nearly 5% this morning and earning attention from investors as Americans with student loans are set to resume payments on them in just a few days.
The interest on the loans resumed increasing on Sept. 1.
Although student loan payments are resuming Oct. 1, the rules for the payments will not be identical to those that prevailed before the pandemic. Specifically, borrowers who fail to make their payments on time “will not be labeled as delinquent, will not have their wages garnished and will not be referred to debt collections,” The Hill noted.
On the other hand, interest will pile up on loan balances, and delinquent borrowers’ credit ratings could drop.
Over 45 million Americans will be affected by the resumption of repayments.
How Will SoFi Be Affected by the Resumption?
SoFi generates revenue when those with student loans refinance them with the company, which is a leading provider of these loans. The resumption of repayment requirements will cause more Americans to refinance their student loans, Bank of America believes.
According to Bank of America, SoFi’s share of student loan refinancing activity was 40% prior to the pandemic and has reached 60% this year.
The bank has a “neutral “rating and an $11.50 price target on the name. SOFI stock closed yesterday at $7.77.
Another Bank Has a Bearish View of SOFI Stock
On Aug. 1, investment bank Keefe, Bruyette & Woods cut its rating on SOFI to “underperform,” citing valuation and its belief that the firm would generate only “modest” profits “at best” in 2024.
The shares are down 4% in the last month, but they have jumped 80% so far in 2023 and are up 68% in the last 12 months.
As of this writing, Larry Ramer 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.