Shares of SoFi (NASDAQ:SOFI) stock are in focus as the Supreme Court recently struck down President Joe Biden’s student loan relief plan. The plan aimed to cancel $20,000 of student loan debt for Pell Grant recipients and $10,000 for borrowers earning less than $125,000 per year. The Supreme Court ruled 6-3 against the plan, stating that Biden had exceeded his constitutional power and required the approval of Congress.
This decision comes as a significant setback for Biden, who had campaigned on the promise of student debt cancellations. The White House, however, has reassured that Biden is not giving up and will have more to say on the matter.
SoFi, a leading personal finance company, experienced an initial 5% spike in its stock after the news broke. However, the shares have since fallen into negative territory. It’s worth noting that SoFi’s student loan origination volume for the first quarter of this year was $525 million, accounting for approximately 15% of its overall origination volume. This figure represents a decline of over 50% compared to the average pre-pandemic volume. The decrease in origination volume can be attributed to the federal student loan moratorium that was in place.
Secretary of Education Miguel Cardona had argued that the Heroes Act of 2003 gave him the authority to cancel $430 billion in student loans. The act supposedly granted Cardona the power to modify the federal student loan system during times of national emergency. However, Chief Justice John Roberts countered this argument, stating that the act only allowed the Secretary to waive or modify existing provisions and not to rewrite the entire statute.
As a result of the Supreme Court’s ruling, the Education Department has put in place a safety net period for borrowers. This period will offer a 90-day grace period for borrowers in the event of missed payments. Missed payments will be put on forbearance and will not negatively impact credit ratings.
The decision to strike down Biden’s student loan relief plan has certainly had an impact on the stock market and on thousands of borrowers who were hoping for debt cancellation. With Biden vowing to continue the fight, it remains to be seen what steps will be taken next in addressing the student loan crisis.
Overall, the future of student loan relief is uncertain, and investors will be closely monitoring updates from the White House and Congress to gauge potential impacts on companies like SoFi. The personal finance company has seen a strong performance this year, with its stock rising over 85%. However, the resumption of student loan payments in October has provided a boost to SoFi.
As developments unfold, borrowers and investors alike will be keeping a close eye on the ongoing discussions surrounding student loan relief. The Supreme Court’s decision serves as a reminder that the issue of student loan debt is complex and requires careful consideration and collaboration between the branches of government to find a viable solution.
