SoFi Bank is suing to block Biden’s student loan payment pause

WASHINGTON (AP) — A private bank is trying to force the Biden administration to end the break in federal student loan paymentsarguing that the moratorium has no legal basis and has cost the bank, known for its refinancing activities, millions of dollars in profits.

In a federal lawsuit filed Friday in Washington, SoFi Bank NA asked a federal judge to reverse President Joe Biden’s latest extension of the payment freeze. The first student loan payments were halted by the administration of President Donald Trump at the start of the pandemic. The break has been extended eight times in three years.

The bank says its federal student loan refinancing business has suffered as borrowers have little incentive to refinance as payments and interest remain on hold. At a minimum, the lawsuit asks a judge to limit the break only to borrowers who would qualify for Biden’s cancellation plan.

Biden’s latest extension, which was announced in November and could last until this summer, is illegal on “multiple grounds,” the lawsuit alleges.

Unlike the first seven extensions, which were designed to help borrowers struggling due to the pandemic, the last one was introduced solely in response to legal challenges to Biden’s plan for widespread student debt forgiveness, the lawsuit said. The plan is currently being challenged in the Supreme Courtwho is expected to rule in June.

“The eighth extension does not even attempt to repair the damage from the pandemic, but rather to reduce the ‘uncertainty’ caused by the debt cancellation process,” SoFi says in the lawsuit.

SoFi argues that this is not a valid reason allowed 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 Law Act because the administration failed to seek feedback from the public.

The most recent extension has cost the bank at least $6 million in lost profits, SoFi says, and could add up to a total of $30 million in losses if it continues through August.

“Essentially, SoFi is being forced to compete with loans that offer 0% interest and where any pending repayment of principal is completely optional,” the lawsuit said.

The Department of Education defended the legality of the break, calling the lawsuit “an attempt by a billion-dollar company to make money while pushing 45 million borrowers back into repayment.”

“The department will continue to fight to provide relief to borrowers, provide a smooth path to repayment, and protect borrowers from industry and special interests,” the agency said in a statement.

The lawsuit was quickly condemned by borrower advocates, who called it a money grab at the expense of those struggling with student debt.

“The real story here is the enormous risk this poses to tens of millions of working people to whom SoFi would never lend – families across the country who depend on student loan payments are pausing to protect them from financial devastation,” says Mike Pierce , executive director of the Center for the Protection of Students. ___

The Associated Press education team is supported by the Carnegie Corporation of New York. The AP is solely responsible for all content.





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