Earlier this month, the U.S. Department of Education announced that the federal student loan moratorium would finally come to a halt in October. The moratorium has been active since March 2020, putting billions of dollars of payments on pause. This has directly affected SoFi (NASDAQ:SOFI), as some of its revenue stems from student loans and student loan refinancing.
In its first-quarter earnings, the personal finance company stated:
“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.”
SoFi’s first-quarter student loan origination volume of $525 million accounted for about 15% of its total origination volume. The remaining contributors to SoFi’s volume are personal and home loans.
Now, the Supreme Court is set to make a decision on President Joe Biden’s student debt forgiveness plan by the end of the month. Let’s get into the details.
SOFI Stock: Watch for a Big SCOTUS Catalyst This Week
Last August, Biden announced his plan for $20,000 in student debt forgiveness for Pell Grant recipients and $10,000 in student debt forgiveness for borrowers earning less than $125,000 per year. In total, the plan is expected to cost over $400 billion.
However, the plan received stark opposition in the form of several lawsuits. These lawsuits put Biden’s plan on hold, although a decision from the Supreme Court should be released sooner than later.
Essentially, the lawsuits argued that Biden’s plan overreached his constitutional power. In response, Biden’s administration cited the Heroes Act of 2003, which provides the U.S. Secretary of Education with the power to alter the federal student loan system during times of national emergency.
Six Republican-led states who filed a lawsuit against the plan argued that the Heroes Act “is not an across-the-board, get-out-of-debt provision that an administration can invoke at will.” Shareholders of SOFI stock would likely agree with this argument, as a passage of Biden’s plan would reduce student loan business.
According to CNBC, higher education expert Mark Kantrowitz believes a court ruling is likely to be released by early July, before the court’s summer recess.
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.
