Student loan and student loan refinancing stocks, like SoFi (NASDAQ:SOFI), have been in full focus this week following President Joe Biden’s announcement that he would cancel $9 billion of student loans for 125,000 borrowers. Since Biden took office, he has canceled $127 billion in student debt for 3.6 million Americans.
First things first, no, Biden is not trying to sink SOFI stock. In all honesty, it’s likely possible that he has never even heard of SoFi before. While the cancellation of student debt may be detrimental to SoFi’s student loan business, it provides a much-needed break for borrowers under pressure. These cancellations also, partly at least, fulfill a political promise he’s been campaigning on.
SOFI Stock Takes a Hit Following Biden’s Student Debt Cancellation Plan
Biden’s latest round of student loan debt cancellation will include 53,000 borrowers through the Public Service Loan Forgiveness Program (PSLF). Eligible borrowers under this program in qualifying public sectors will have their debt forgiven after making 10 years of monthly payments. Furthermore, another 51,000 borrowers who have made payments for 20 years on income-based repayment plans will experience debt cancellation due to a “recount of their past payments.”
“The administration has found that these borrowers already qualified for student loan forgiveness but were missing out because of past administrative errors,” explained CNN Politics. Finally, the last 22,000 borrowers include those who have a total or permanent disability.
SoFi has not publicly commented on Biden’s new plan, although CEO Anthony Noto previously penned a letter in support of student debt cancellation for “distressed and defaulted borrowers.” The letter, which was written during the student loan moratorium, also made it clear that he supported a resumption of payments for the “affluent and capable.”
The moratorium officially ended this month, with interest accrual beginning in September. As of June 30, U.S. households had roughly $1.765 trillion in student debt, down slightly from $1.775 trillion as of March 30. According to the Federal Reserve Bank of New York, U.S. households had $1.57 trillion in outstanding student debt as of June 30.
Upcoming Earnings Report
Meanwhile, SoFi has confirmed that it will report its third-quarter earnings on Oct. 30 before the market opens. Analysts are expecting $516 million of revenue, which would imply year-over-year growth of 23.03%. EPS is expected to be a loss of eight cents, compared to a loss of nine cents a year ago. Analysts expect SoFi to break even on an EPS basis by Q1 of 2024.
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.
