SoFi Technology filed a suit in February attempting to block the Biden Administration’s ongoing pause on payment of federal student loans, saying that a legal basis does not exist for the action. SoFi has lost millions of dollars in profit as a result, it says.
But loan advocates say the lawsuit is off the mark.
"A multi-billion-dollar lending company is asking the federal government to prioritize its profits over protecting the public interest,” Eden Iscil, a Public Policy Manager at the National Consumers League, told Yahoo Finance. “Millions of individuals with student debt don’t even have a college degree; many of these borrowers are parents who took out loans on behalf of their kids or are students who couldn’t complete their degrees as the costs quickly added up.”
Also, since the Supreme Court has heard oral arguments in the case and may render a decision later in 2023, SoFi’s suit may be irrelevant.
“One has to ask what is the point of this lawsuit as the president's student loan forgiveness plan will be resolved by the U.S. Supreme Court this year one way or another, and repayment will restart 60 days later,” author and loan expert Mark Kantrowitz told Yahoo Finance.
The suit claims that the HEROES Act, which the Department of Education is using to justify the pause on loans up to $20,000, is not a valid defense. The suit also says that SoFi has lost $300 - $400 million in refinancing revenue and $150 - $200 million in profits since 2020, when the Trump administration put the pause into effect. The HEROES Act allows for a pause on loans during a national emergency, such as the COVID-19 pandemic.
The Biden Administration has extended the pause several times, most recently in December after two lawsuits derailed the plan, sending it to the Supreme Court. The Department of Education said their actions are legal and questioned SoFi’s motives.
“This lawsuit is an attempt by a multi-billion-dollar company to make money while they force 45 million borrowers back into repayment – putting many at serious risk of financial harm,” a Department of Education spokesperson told Yahoo Finance. “The payment pause is legal, as is our plan to provide one-time debt relief to tens of millions of borrowers most at risk of delinquency and default when they return to repayment.”