SoFi Bank sues to block Biden’s student loan payment pause
WASHINGTON — A private bank is trying to force the Biden administration to end its pause on federal student loan payments, arguing that 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 Friday in Washington, SoFi Bank NA asked a federal judge to overturn the latest extension of President Joe Biden’s payment suspension. Student loan repayments were first halted at the start of the pandemic by the administration of President Donald Trump. The break has been extended eight times in three years.
The bank says its federal student loan refinancing business has suffered because borrowers have little incentive to refinance while payments and interest remain suspended. At a minimum, the lawsuit asks a judge to limit the pause only to borrowers who would be eligible for Biden’s cancellation plan.
Biden’s latest extension, which was announced in November and could extend through this summer, is illegal on “multiple grounds,” according to the lawsuit.
Unlike the first seven extensions, which were intended to help borrowers struggling because of the pandemic, the latest was enacted solely in response to legal challenges to Biden’s plan for widespread student debt forgiveness, the lawsuit says. The plan is currently being challenged in the Supreme Court, which is expected to rule by June.
“The eighth expansion does not even attempt to repair the damage caused by the pandemic at all, but rather to alleviate the ‘uncertainty’ caused by the debt forgiveness litigation,” SoFi states in the lawsuit.
SoFi argues that is not a valid reason permitted by the HEROES Act, the federal law the Biden administration invoked to continue the hiatus. The bank also argues that the extension violated the Administrative Procedure Act because the administration failed to invite the public to respond.
The most recent expansion cost the bank at least $6 million in lost revenue, according to SoFi, and it could result in a total of $30 million in losses if it goes through August.
“In essence, SoFi is forced to compete with loans that have 0% interest rates and for which any ongoing repayment of principal is entirely optional,” the lawsuit states.
The Department for Education defended the legality of the break, calling the lawsuit “an attempt by a multibillion-dollar company to make money while forcing 45 million borrowers to repay”.
“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 cash 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 workers that SoFi would never lend to – families across the country who depend on the student loan payment pause to protect them from financial devastation.” , said Mike Pierce, executive. Director of the Center for the Protection of Student Borrowers.