SoFi Bank sues to block suspension of Biden’s student loan payments

WASHINGTON. A private bank is trying to get the Biden administration to end the federal student loan pause, 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 President Joe Biden’s latest extension of the payment break. Student loan repayments were first halted at the start of the pandemic by the administration of President Donald Trump. The pause was extended eight times over three years.

The bank says its federal student loan refinancing business has suffered because there is little incentive for borrowers to refinance while fees and interest remain in place. At a minimum, the lawsuit is asking the judge to limit the pause to only borrowers who would be eligible for Biden’s cancellation plan.

Biden’s latest extension, which was announced in November and could run until this summer, is illegal for “multiple reasons,” the lawsuit says.

The lawsuit says that unlike the first seven extensions, which were supposed to help borrowers struggling as a result of the pandemic, the latest was made solely in response to legal challenges to Biden’s plan to write off student debt across the board. The plan is currently being challenged in the Supreme Court, which is expected to rule by June.

“The eighth extension is not intended to repair damage from the pandemic at all, but rather to alleviate the ‘uncertainty’ caused by the debt cancellation litigation,” SoFi’s lawsuit says.

SoFi contends that this is not a valid excuse permitted by the HEROES Act, a federal law that the Biden administration relied on to extend the pause. The bank also contends that the extension violated the Administrative Procedures Act because the administration failed to get feedback from the public.

The most recent extension cost the bank at least $6 million in lost profits, SoFi said, and it could result in a $30 million loss if extended through August.

“Essentially, SoFi is forced to compete with 0% interest rate loans, for which any ongoing principal repayment is entirely optional,” the lawsuit says.

The Department of Education defended the legality of the pause, calling the lawsuit “an attempt by a multi-billion dollar company to make money while they are forcing 45 million borrowers to return payments.”

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

The lawsuit drew swift condemnation from borrower advocates, who called it extortion of money at the expense of those struggling with student debt.

“The real story here is that this poses a huge risk to tens of millions of working people who SoFi would never lend to — families across the country that depend on student loan repayments are being paused to protect them from financial devastation. ,” said Mike Pierce, chief executive. director of the Center for the Protection of Student Borrowers.