A major banking institution and federal student loan refinancing company has called on a federal court to end the Biden administration’s pause on student loan payments, arguing that the moratorium has no legal basis.
San Francisco-based SoFi Bank and SoFi Lending Corp.—a student loan refinancing company—sued the Department of Education (DOE) on Friday, according to a complaint (pdf) filed in the District Court for the District of Columbia.
That complaint asked that President Joe Biden’s latest extension of the student-loan payment pause be deemed “invalidated and set aside” or, at a minimum, that the DOE be ordered to require repayment by borrowers who are not eligible for student-debt cancellation.
It also asked that the court issue a permanent injunction preventing the administration from “enforcing, applying, or implementing the eighth extension of the loan moratorium.”
Biden announced in November that his administration would extend its moratorium on student loan repayments, interest, and collections through June 30, 2023, marking the eighth extension.
In its filing with the court, SoFi Bank argued that the moratorium has no legal basis and has cost the bank, along with its refinancing business, millions of dollars in profits.
Specifically, SoFi Bank and SoFi Lending Corp. said the pause violates the Administrative Procedure Act (APA) because the department failed to follow notice-and-comment procedures, through which the administration should have first sought the public’s input or comment on the program.
Headquarters of the American online personal finance company SoFi Technologies Inc. in San Francisco in June 2021. (Google Maps/Screenshot via The Epoch Times)
SoFi Says Loan Refinancing Business Declining
Additionally, they argued that Biden does not have the authority to continue extending the moratorium under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 because it provides “limited authority to relieve transitory burdens for federal student borrowers who are temporarily unable to make payments on their loans due to active military service or national emergencies.”
The HEROES act allows the DOE to grant waivers or relief to recipients of student financial aid programs under Title IV of the Higher Education Act of 1965 in connection with a war or other military operation or national emergency.
“But the eighth extension applies to all federal borrowers in the country, not just those suffering hardship as a result of the current phase of the pandemic,” the SoFi complaint says.
“Indeed, the eighth extension does not even attempt to redress harm from the pandemic at all, but rather to alleviate ‘uncertainty’ caused by the debt-cancellation litigation—a justification that the Act does not recognize or allow.”
SoFi claimed that the loan moratorium has caused its federal student loan refinancing business to “decline dramatically” by approximately $9 million to $11 million in total revenues and $6 million to $8 million in profits since the eighth extension went into effect.
SoFi expects to lose $40 million to $45 million in total revenues and approximately $25 million to $30 million in total profits if the latest extension remains in effect through August, the company said.