Supporters of U.S. President Joe Biden's plan to cancel over $400 billion in college debt to more than 43 million borrowers reacted angrily Monday to a lawsuit filed by an online finance company trying to overturn his administration's latest pause on student loan repayments—a policy that has cost the firm more than $100 million in lost profits.
San Francisco-based SoFi filed suit Friday in the U.S. District Court for the District of Columbia onFriday against the U.S. Department of Education and Education Secretary Miguel Cardona over the agency's rdecision in November to extend a Covid-19-based moratorium on student loan repayments due to ongoing legal battles.
Founded in 2011, SoFi "was once the leader of a booming private student loan refinancing industry," according to to the Student Borrower Protection Center (SBPC), a nonprofit advocacy group. SoFi's stock price has plummeted by more than 70% since its peak.
"SoFi has a long history of misleading student debtors and tricking them into refinancing their loans."
SoFi toldThe Washington Post that "we have supported and continue to support targeted student loan forgiveness, in addition to the student loan payment moratorium during the economic crisis at the height of the Covid-19 pandemic," but that the latest extension is an "illegal overreach."
However, according to the Debt Collective, the U.S.' first debtors union:
SoFi has a long history of misleading student debtors and tricking them into refinancing their loans in a way that costs hardworking Americans more interest in the long run. SoFi also engages in racist lending practices. The Debt Collective is encouraging its members—and anyone who has been misled or harmed by SoFi—to immediately file a complaint with the Consumer Financial Protection Bureau as well as their state's attorney general.
The Biden administration's pause extensions have kept cash in the pockets of people who desperately need it—disproportionately women, low-income families, and Black communities. Thanks to years of a pause on federal student debt, tens of millions of Americans have been able to put food on the table, pay for childcare, stay in their homes, and purchase their lifesaving medicine.
"SoFi CEO Anthony Noto is a financial vulture gorging himself on our bloated and broken student loan system," SBPC executive director Mike Pierce said in a statement. "Noto's failing company thinks it is entitled to engorge itself by skimming the cream off of the federal student loan portfolio and—after a failed back-room lobbying blitz—is running into court because the government doesn't agree."
"The real story here is the huge risk this poses to tens of millions of working people who SoFi would never lend to—families across the country that depend on the student loan payment pause to shield them from financial devastation," Pierce added.
As the Post's Danielle Douglas-Gabriel noted:
SoFi has a lot at stake with the ongoing payment pause. The company made a name for itself by refinancing education loans—lowering the interest rates and monthly payments of people with private and federal student loans. Refinancing federal student loans can save borrowers money, especially those with high-interest graduate debt. But it means giving up federal benefits, including access to income-driven repayment plans and public service loan forgiveness. The trade-off has become less appealing in the wake of the payment pause, according to SoFi.
The moratorium has eliminated the primary benefits of student loan refinancing by suspending interest on most federal student loans for the past three years, the complaint said. Whereas SoFi originated about $450 million to $500 million of refinanced federal student loans per month before March 2020, the volume plummeted by more than 75% following the initial pause, according to the company. The decline has accelerated and resulted in the company losing roughly $150 million to $200 million in profits over the past three years, the company said.
The current repayment pause—which costs the federal government $5 billion each month—could continue until August, depending upon the timing of the U.S. Supreme Court's ruling on two cases that will decide the fate of Biden's plan.
Last month, the nine justices heard oral arguments in the cases. Members of the court's right-wing supermajority repeatedly criticized the president's proposal and its estimated $400 billion-plus price tag. U.S. Solicitor General Elizabeth Prelogar told the Supreme Court that failing to cancel student debt and lifting the moratorium will bring extreme financial hardship to millions of borrowers and cause defaults to skyrocket.
"The Department of Education should immediately cancel all federal student loans. Don't feed the parasites."
Debt Collective spokesperson Braxton Brewington ripped SoFi's "ridiculous" filing as "just a continuation of the sham lawsuits pushed by Republican states and right-wing dark-money groups opposing student debt relief."
"What the Biden administration needs to do is fight back and choose working-class people over corporate profits," Brewington continued. "A predatory corporation losing revenue because the federal government continues good policy is not grounds to end that policy. "SoFi claims they want to lower Americans' interest rates, but they're working to destroy 0% interest to force Americans into a higher rate with them."
Debt Collective organizer Thomas Gokey called SoFi "a parasite on a policy failure."
"SoFi CEO Anthony Noto is starting to get desperate now that everyone realizes that there is no reason to ever restart student debt payments," Gokey contended. "The Department of Education should immediately cancel all federal student loans. Don't feed the parasites."
The lawsuit came on the same day that the Student Loan Law Initiative—an academic partnership between the University of California, Irvine School of Law and SBPC—published a new analysis detailing how "the ongoing student loan payment pause may have been even more beneficial for federal borrowers than previously understood."
This content originally appeared on Common Dreams and was authored by Brett Wilkins.