A major student loan company has filed a lawsuit against the Biden administration to end the moratorium on student loans for millions of borrowers.
Here’s what you need to know.
Student loan freeze continues for three years
President Trump initially implemented a nationwide pause on most federal student loan payments, interest and collection efforts in March 2020 in response to the COVID-19 pandemic. Congress then codified that relief into law through the CARES Act, which halted student loan payments, suspended interest and collections for six months. President Trump and later President Biden extended that relief several times.
Biden’s most recent extension is set to expire 60 days after June 30, or whenever the Supreme Court rules on Biden’s one-time student loan forgiveness plan.
Student loan company sues to end student loan moratorium
Student loan refinancing company SoFi filed a trial against the Biden administration this week, demanding an end to the student loan freeze. The company — which offers private student loan products to borrowers seeking to refinance existing federal or private student loans — argues that Biden’s most recent extension is illegal and deprives them of revenue from its student loan refinance products. Is.
Claiming that the most recent extension of the student loan freeze by Biden “was adopted in an arbitrary and capricious manner without following mandatory procedural requirements,” SoFi argued in its complaint that the administration’s response to the uncertainty surrounding student loans It was unfair for the Biden administration to trust. Pardon initiative before Supreme Court as justification for another extension.
SoFi argues that the ongoing student loan freeze has hurt the company’s bottom line. “The reduction in refinancing business due to the loan moratorium has caused significant damage to SoFi,” the complaint said. “Since the loan moratorium went into effect in March 2020, and as a direct result of the moratorium, SoFi has lost approximately $300 to $400 million in total revenue from its federal loan refinancing business. As a result, SoFi lost approximately $150 to $200 million in profits during that period. Those numbers also significantly downplay the moratorium’s damaging effects, as they don’t take into account the growth that SoFi’s federal student-loan refinance business would have otherwise experienced.
With federal student loan interest rates set to zero percent as part of the ongoing student loan freeze, there’s little reason for any federal student loan borrower to choose to refinance through a private lender like SoFi. Specifically, refinancing a federal student loan through a private loan program will permanently lock the borrower out of any federal student loan debt relief, including any federal student loan forgiveness initiative, income-driven repayment plan or default solution.
SoFi is seeking a court order to end the student loan moratorium, or alternatively, “to require repayment by borrowers who are not eligible for student-loan cancellation.”
Biden administration and borrower advocacy group respond to SoFi suit
The White House responded to the suit, saying Biden’s latest extension of the student loan moratorium is legal. A White House statement said, “This lawsuit is an attempt by a multi-billion dollar company to make money while they force 45 million borrowers into repayment – putting many at risk of serious harm.” “
Leading advocacy organizations for student loan borrowers had harsh words for SoFi. In a statement, Mike Pierce, executive director of the Student Borrower Protection Center, criticized the SoFi CEO as “a financial vulture who is gorging herself on our bloated and broken student loan system.” Working people that SoFi will never lend to—families across the country who depend on student loan payments stop to save them from financial ruin.”
“The actions of student loan lenders and authorities are nothing short of an attack on America’s students, parents and borrowers,” Natalia Abrams, president of the Student Loan Crisis Center, said in a statement. “They are using their vast wealth to block President Biden’s debt cancellation plan and pandemic payments. We condemn Sophie’s actions and call on the Biden Administration to take all necessary steps to protect borrowers from these egregious legal maneuvers.
“This ridiculous lawsuit is a continuation of the sham lawsuits pushed by Republican states and right-wing black-money groups opposing student loan relief,” said Braxton Brownington, a spokesman for Debt Collective. “A predatory corporation losing revenue because the federal government continues good policy is not grounds for ending that policy. SoFi claims they want to lower Americans’ interest rates, but they charge Americans with their high Working to destroy the zero percent interest to force the rate.
Lawsuit is latest attempt to end Biden’s extension of student loan freeze
SoFi’s lawsuit is the latest attempt to block Biden’s recent expansion of the student loan moratorium. Last month, congressional Republicans filed the “Stop Reckless Student Loan Act” to end the student loan moratorium and block Biden from enacting comprehensive student loan forgiveness.
But with the Republican bill having little chance of passing the Senate (where Democrats hold a narrow majority), SoFi’s lawsuit could pose a more direct threat to borrowers based on the student loan freeze.
The Biden administration has relied on the HEROES Act of 2003 to limit the breaks, as did the Trump administration. The HEROES Act allows the Department of Education to modify or forgive federal student loan programs in response to a national emergency like a pandemic. The Biden administration used the same statutory authority to establish the one-time student loan forgiveness initiative that is now before the Supreme Court.
During a Supreme Court hearing last week, the parties and justices discussed the ongoing student loan moratorium. While most justices expressed skepticism about Biden’s student loan forgiveness plan, there appears to be broad agreement that the HEROES Act does in fact allow the Department of Education to temporarily suspend student loan payments and interest in response to a national emergency. authorizes for However, at least some justices suggested that this authority was not unlimited and needed to be sufficiently connected to an emergency to be valid.
With the Biden administration set to end the Covid emergency in May, the central rationale for the student loan freeze may finally disappear. And if SoFi gets its way, borrowers could be forced to resume student loan payments sooner than expected.
Further Reading Student Loan Forgiveness
4 Student Loan Forgiveness Updates After Supreme Court Hearing
Biden’s student loan forgiveness plan could be in trouble after Supreme Court hearing
Borrowers Receive Student Loan Forgiveness Approval Emails After Court Green-Lights Settlement
What happens if the Supreme Court rejects Biden’s student loan forgiveness plan?
Credit: www.forbes.com /