3 reasons why a major student-loan lender thinks millions of borrowers should be thrown back into repayment, with or without debt relief (2024)

After Biden's plan to cancel up to $20,000 in student debt was put on hold due to two conservative-backed lawsuits seeking to block the plan, the president extended the student-loan payment pause through 60 days after June 30, or 60 days after the Supreme Court issues a decision on the legality of the relief, whichever happens first. The Court heard oral arguments in both of the cases last week.

SoFi claimed in its complaint that the latest extension of the payment pause was "unlawful on multiple grounds."

"Unlike the other extensions, the Department did not claim that continuing the moratorium was necessary to address harm caused to borrowers affected by the pandemic," the complaint said. "Instead, the Department asserted that the further extension was intended to alleviate 'uncertainty' for borrowers during the pendency of ongoing litigation regarding the debt-cancellation program. Yet the extension applies to all federal borrowers, whether or not they qualify for debt cancellation."

SoFi targeted the end of the national emergency declaration, along with revenue loss to its business operations, as reasons why the payment pause should end. An Education Department spokesperson told Insider in a Monday statement that "the payment pause is legal, as is our plan to provide one-time debt relief to tens of millions of borrowers most at risk of delinquency and default when they return to repayment."

"This lawsuit is an attempt by a multi-billion dollar company to make money while they force 45 million borrowers back into repayment – putting many at serious risk of financial harm," the spokesperson said. "The Department will continue to fight to deliver relief to borrowers, provide a smooth path to repayment, and protect borrowers from industry and special interests."

Here are three reasons why SoFi thinks it's time for millions of student-loan borrowers to start paying off their debt.

Biden declared an end to the COVID-19 national emergency

The HEROES Act of 2003 is once again at the center of a lawsuit. Biden used the HEROES Act for his broad student-debt relief plan, which gives the Education Secretary the ability to waive or modify student-loan balances in connection with a national emergency, like COVID-19. The lawsuits that blocked the broad debt relief argued that legal route was an overreach of authority and cannot be done without Congressional approval.

SoFi took a similar stance. In its complaint, it referenced Biden's announcement that the national emergency declaration will end on May 11. "In making this announcement, however, the Administration simultaneously declared that ending the national emergency would have no effect on the ongoing student-loan repayment pause," it wrote, adding that the administration "declined to answer questions regarding how far beyond the end of the national emergency the Administration's HEROES Act authority extends, or how the Administration is determining which borrowers have been harmed by the COVID-19 pandemic."

Biden's administration has repeatedly arguedthat a national emergency declaration doesn't need to be in place for the Education Department to continue helping borrowers recover from the financial impacts of the pandemic, which can be long-lasting.

"There's no doubt that forbearance has provided very powerful and critical support to borrowers over the life of the COVID pandemic, but the Secretary found that once forbearance policy lifts, millions and millions of borrowers are going to be worse off with respect to their ability to pay because of COVID," Solicitor General Elizabeth Prelogar said during oral arguments at the Supreme Court.

Biden didn't follow proper administrative procedure

Again, SoFi made a similar complaint to one of the lawsuits that is seeking to block Biden's broad debt relief. It said that Biden did not follow proper procedure under the Administrative Procedure Act (APA), which in part requires an agency to solicit public comment when working to implement a new rule or policy change.

"The eighth extension of the Loan Moratorium was not adopted through the required notice-and-comment procedures. Notice of a proposal for the extension was not published in advance in the Federal Register; interested persons were not given an opportunity to comment, and their views were not considered by the agency," SoFi said.

Prelogar noted during oral arguments that the HEROES Act is exempt from notice-and-comment procedures, but SoFi said that the the APA requires that procedure for "substantive decision-making," like a student-loan payment pause extension.

SoFi has suffered revenue loss from the payment pause

SoFi laid out direct harm the student-loan payment pause has caused its business. It stated in the complaint that as a refinancer for over 450,000 borrowers, it "competes with the federal government for federal student loan borrowers by offering them private financing under more favorable terms."

"In essence, SoFi is being forced to compete with loans with 0% interest rates and for which any ongoing repayment of the principal is entirely optional," it said. Since the payment pause went into effect, the bank said it lost $300 to $400 million in total revenues, and since the latest extention went into effect, it lost $9 to $11 million in total revenues.

If the court does not end the entire student-loan payment pause, SoFi is asking that borrowers ineligible for broad relief reenter repayment and place a permanent injunction preventing the Education Department from giving those borrowers additional relief.