By Hugh T. Ferguson, NASFAA Senior Staff Reporter
A personal financing company that oversees student loan refinancing products is suing the Department of Education (ED) to immediately end the ongoing freeze on federal student loan repayments and interest accrual — only for borrowers who are not eligible for loan cancellation — arguing that the latest extensions offered by the administration were unlawful.
In a lawsuit filed by SoFi, the company specifically takes issue with the payment pause extension put in place following legal challenges to President Joe Biden’s student loan debt cancellation plan, which have put the program in limbo.
SoFi argues that the latest extension is no longer relying on the authority granted to the administration through the HEROES Act of 2003, which the current and previous administrations have cited in justifying their authority to continue offering extensions of the payment pause.
“The eighth extension applies to all federal borrowers in the country, not just those suffering hardship as a result of the current phase of the pandemic. Indeed, the eighth extension does not even attempt to redress harm from the pandemic at all, but rather to alleviate “uncertainty’ caused by the debt-cancellation litigation—a justification that the Act does not recognize or allow,” the lawsuit reads. “And the eighth extension is also structured to address litigation uncertainty, not to return borrowers to the financial position that they would have occupied absent the current phase of the pandemic.”
SoFi goes on to argue that the loan moratorium should be “invalidated and set aside” and called for the court to require ED to put borrowers who are not eligible for the debt cancellation program back into repayment.
Last week the United States Supreme Court heard legal arguments that debated the administration’s use of executive authority in developing the student loan debt cancellation program and whether either of the legal challenges have legal standing to dispute the program.
In the coming months the Supreme Court is expected to rule on whether the program can be implemented.
While the issue of standing was heavily debated during SCOTUS’ oral arguments, SoFi has argued that that payment pause has “directly harmed” their federal loan financing business.
“Because the Moratorium suspended payments and interest for federal student loans, and because privately refinanced loans are ineligible for programs and policies applicable to federal student loans, the Moratorium has eliminated the primary benefits of student loan refinancing,” the lawsuit reads. “In essence, SoFi is being forced to compete with loans with 0% interest rates and for which any ongoing repayment of the principal is entirely optional.”
Stay tuned to Today’s News for more developments on the student loan debt cancellation program and utilize NASFAA’s debt cancellation center for more information.
Publication Date: 3/7/2023
Michelle P | 3/7/2023 12:41:43 PM
This suit sounds full of greed. SoFi would rather borrowers resume accruing ED interest in order to ensure their market grab with offers of potentially "more attractive" interest rates. Oh please.
David S | 3/7/2023 10:52:55 AM
In nearly 40 years in financial aid, I have seen some actors clearly motivated by greed, but never approaching this level. Consider that SoFi paid $625M for naming rights of the most expensive sports venue ever built in this country. Consider that they have purchased several other companies at prices in excess of $1B. Consider that in 2021, five of their employees were paid a combined $179M, and for three of them, this represented a raise from the prior year of more than 90% (in one case, well over 200%). According to Wall Street, they're on a pace to exceed 2023 adjusted net revenue projections by nearly half a billion dollars. And consider that borrowers who have refinanced with SoFi can take advantage of NONE of the benefits of the federal student loan repayment features; meaning that the repayment pause has benefited no one who refinanced with or borrowed from SoFi. SoFi has been collecting payments all along.
So you'll have to excuse me for shedding no tears for the "harm" they've been done.
Emily M | 3/7/2023 10:17:02 AM
"Because the Moratorium suspended payments and interest for federal student loans, and because privately refinanced loans are ineligible for programs and policies applicable to federal student loans, the Moratorium has eliminated the primary benefits of student loan refinancing,” Wait... so what's the issue SoFi is raising-that they can't convince federal loan borrowers to refinance with them? Even though options like the Direct Consolidation Loan and income-driven repayment plans existed before the moratorium? Granted, federal loan repayment is a mess, but there tends to be more options to try before selling them off to private companies.... Advertised fixed rates start at 4.99% (up to 8.99%) to refinance. For most recent undergraduate grads, their overall interest rate is likely comparable or lower (remember that 2.75%) and doesn't require a credit evaluation.... so even when rates go back to normal, how many people are they anticipating will refinance? Like they mentioned, private loans haven't qualified for any of the repayment pauses, so there's certainly borrowers out there who could refinance those if they wanted.
Darren C | 3/7/2023 9:51:15 AM
I'm not sure this lawsuit is the answer, however it highlights the incompetence at which this entire payment pause and the pieces attached to it have been handled. ED and the administrations have made such a mess out of the student loan landscape, hurting universities, companies like so-fi and student borrowers in the process. There has not been one discussion of overhauling the extreme costs of education in this country. Everything has been a band-aid with no true accountability present. Run an education system like this, expect law suits like these. Don't blame the companies that have had financial challenges from these mismanaged political agenda's, blame the source, the Gov't who runs the system itself. Until that is addressed, nothing will truly ever change.
Andrew F | 3/7/2023 9:35:54 AM
I don't understand the point of the lawsuit at this time. The repayment pause is nearing it's end anyways.
Solomon M | 3/7/2023 9:35:17 AM
Seems like a stretch to establish standing...
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