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