- Student-loan lender SoFi asked a federal court to end Biden's student-loan payment pause.
- At the very least, it wants borrowers ineligible for Biden's broad debt relief to resume repayment.
A major student-loan lender wants the payment pause to end.
On Friday, SoFi Bank and SoFi Lending Corp. — a student-loan refinancing company — filed a complaint in the District Court for the District of Columbia against the US Education Department asking for President Joe Biden's latest extension of the student-loan payment pause to be "invalidated and set aside," and as an alternative, require borrowers ineligible for Biden's broad student-debt relief to reenter repayment "at minimum."
After Biden announced up to $20,000 in student-loan forgiveness for federal borrowers at the end of August, two conservative-backed lawsuits paused the implementation of the plan. In light of the legal challenges, Biden extended the student-loan payment pause through 60 days after June 30, or 60 days after the Supreme Court issues a decision on the legality of the relief, whichever happens first. The Supreme Court heard oral arguments in the cases last week.
SoFi claimed in its complaint, which Bloomberg law first reported, that the latest extension of the payment pause was "unlawful on multiple grounds."
"The HEROES Act provides limited authority to relieve transitory burdens for federal student borrowers who are temporarily unable to make payments on their loans due to active military service or national emergencies. But 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," the complaint stated.
"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," it added.
Similarly to one of the lawsuits that paused Biden's broad debt relief, SoFi claimed that the Education Department did not follow proper procedure through the Administrative Procedure Act's notice-and-comment period to extend the payment pause, in which the public has an opportunity to comment on a rule the government enacts. Biden's administration has said on numerous occasions that the HEROES Act exempts it from that procedure.
SoFi also detailed how it has been harmed by the additional payment pause extension. It wrote in the legal filing that since 2012, it has refinanced over $30 billion student loans for over 450,000 borrowers, and it said it "competes with the federal government for federal student loan borrowers by offering them private financing under more favorable terms."
"The Loan Moratorium has directly harmed SoFi's federal loan refinancing business," it wrote. "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. 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."
The bank said it has lost about $300 to $400 million in total revenues "as a direct result of the moratorium."
SoFi CEO Anthony Noto has previously expressed his belief that it's time for borrowers to reenter repayment. After releasing its fourth-quarter earnings last month, Noto told Yahoo Finance that the latest payment pause extension will "subsidize people that don't need it."
"We should absolutely fund those people that need the help," he said. "We should forgive those people that need the help. But those that are capable of paying need to be put back into payment, and they shouldn't have their loans forgiven either."
Biden's administration has not yet responded to SoFi's complaint.
"SoFi is a parasite on a policy failure. SoFi CEO Anthony Noto is starting to get desperate now that everyone realizes that there is no reason to ever restart student debt payments," Thomas Gokey, organizer with the Debt Collective — a debtor's union advocating for debt cancellation — said in a statement. "The Department of Education should immediately cancel all federal student loans. Don't feed the parasites."