The American Personal Finance company, SoFi, is suing the Biden administration to terminate its pause on federal student loan payments, stating the move has cost the bank millions.
SoFi Bank NA filed a federal lawsuit on Friday asking the judge for a favorable reaction against the recent extension of the payment pause made by President Joe Biden.
Earlier, during the administration of President Donald Trump, particularly during the time of the world pandemic, student loan payments were halted for a short while. Moreover, this is reported as the eighth extension made in three years.
Following the extension, the Bank is suffering millions in losses as the borrowers have little incentive to pay back while interest and the entire payment are kept on hold. The lawsuit expects the federal judge to verdict in their support.
At a minimum, they are asking to limit the sudden pause only to borrowers who are eligible for the president’s cancellation plan as they claimed in the lawsuit that Biden’s latest extension was “unlawful on multiple grounds.”
In addition to it, the lawsuit asserted that the recent extension was in no way related to the first seven extensions, as while they were meant to offer assistance to borrowers struggling to meet the ends as a result of the pandemic, this one was solely aimed at student debt forgiveness.
Furthermore, the lawsuit added that the last extension made by Biden’s Student Loan payment was not at all an attempt to bring back the nation to life after a pandemic. According to SoFi Bank, the administration is rather trying to alleviate uncertainty which resulted in a part of the debt cancellation litigation.
Finally, the bank argued that the extension clearly violated what was put forward by the Administrative Procedure Act, and they believe it happened so because they didn’t consider inviting feedback from the general public.
The lawsuit comes after SoFi has to face at least $6 million in lost profits, which would possibly cross $30 million if the extension continues throughout the next couple of months. Although it is an estimation, expecting such a huge loss that can be hard to recover in the future triggered them to take immediate action.
SoFi explained how they are in more trouble as they are forced to cope with loans having 0% interest rates, keeping the repayment of the principal amount optional.
The filing is currently being reviewed by the Supreme Court and as far as the results are concerned, they are expected to be revealed in June.
After the lawsuit was filed last week, the Education Department appeared in its defense by stating the legality of the pause. They named it as an attempt from a multi-billionaire company to make money by forcing millions of their clients back into repayment.
The agency further added that they are missioned to fight to deliver a smooth path of repayment for the borrowers, ensuring their relief, and protecting their special interests. As per the department, SoFi is grabbing money from students who are struggling with loans.
Meanwhile, the director of the Student Borrower Protection Center, Mike Pierce opined that the current situation is dragging the vulnerable working people, who SoFi had no intention to lend to as well as the families who are leading each day by entirely depending on the student loan payment pause, as they are finding the latest extension from the Biden administration as a shield from their financial devastation.
The initiative for the eighth extension was taken by the administration earlier in 2023 as they are completely focused on making the loan system noir manageable.
The borrowers had a sigh of relief when the Education Department announced the pause that enables millions of borrowers to cut their monthly federal payments by half.
According to the extension, the borrowers’ monthly payments are compared to thief family size and income, and as per the income-driven repayment plans, the remaining debt would be forgiven after a determined number of years.
Unlike the president’s former initiative, this time the renewed payment plan was supposed to become a long-standing solution for the student loan infrastructure.
Until very recently, the programs implemented for the students were bothered about the rising cost of higher education, while the students were constantly struggling to cope with whatever they were provided with.
There weren’t any noticeable distractions from the students’ side. However, the administration altered their way of thinking for once in order to support them to get better education free of financial burdens.