SoFi Bank is suing to block Joe Biden’s student loan payment freeze
A private bank is trying to force the Biden administration to end its moratorium on federal student loans, arguing the moratorium has no legal basis and has cost the bank known for its refinancing business millions of dollars in profits.
In a federal lawsuit filed in Washington on Friday, SoFi Bank asked a federal judge to overturn President Joe Biden’s recent payment pause extension. Student loan payments were initially halted by President Donald Trump’s administration early in the pandemic. The hiatus was extended eight times over three years.
The bank says its federal student loan refinancing business has suffered because borrowers have no incentive to refinance while payments and interest remain suspended. At the very least, the lawsuit asks a judge to limit the pause to only borrowers eligible for Biden’s termination plan.
Biden’s recent extension, which was announced in November and could extend into this summer, is unlawful for “a number of reasons,” the lawsuit states.
Unlike the first seven extensions, which were intended to help borrowers struggling as a result of the pandemic, the most recent extension was issued solely in response to legal challenges to Biden’s plan for widespread student debt relief, the lawsuit states. The plan is currently being challenged in the Supreme Court, which is expected to rule by June.
“The eighth extension does not attempt at all to undo damage from the pandemic, but rather to alleviate the ‘uncertainty’ caused by the debt relief process,” SoFi’s lawsuit reads.
SoFi argues that this is not a valid reason authorized by the HEROES Act, the federal law that the Biden administration invoked to continue the pause. The bank also argues that the extension violated the Administrative Procedures Act because the administration failed to seek feedback from the public.
The latest extension has cost the bank at least $6 million in lost profits, according to SoFi, and could result in losses totaling $30 million if continued through August.
“Essentially, SoFi is forced to compete with 0% interest rate loans where ongoing principal repayment is entirely optional,” the lawsuit reads.
The Department of Education did not immediately comment on the lawsuit.
The lawsuit was quickly condemned by borrower advocates, who described it as stealing money at the expense of those struggling with student debt.
“The real story here is the tremendous risk this poses to tens of millions of working people who would never be loaned by SoFi — families across the country who depend on the student loan payment pause to protect them from financial devastation,” he said Mike Pierce, Executive Director of the Student Borrower Protection Center. ___
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