Bank Sues Biden Admin Over Latest Student Loan Payment Freeze
- SoFi, a private finance company and bank, sued President Joe Biden’s administration on Friday over its latest pause on student loan repayments.
- The pause was issued in November and extends the deadline to begin repayments after the COVID-19 pandemic to 60 days after litigation over its student loan forgiveness plan ends.
- “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,” a Department of Education spokesperson told the Daily Caller News Foundation.
SoFi, a private finance company and bank, filed a lawsuit Friday against President Joe Biden’s administration over extended freezes in student loan repayments, according to a copy of the complaint obtained by Bloomberg Law.
Borrowers are currently not required to repay student loans until either 60 days after litigation over the Biden administration’s student loan forgiveness plan ends. SoFi sued Department of Education (DOE) Secretary Miguel Cardona in the U.S. District Court for the District of Columbia and argued that the latest extension, which was announced in November 2022, is unlawful and hurts its business.
“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,” SoFi told The Washington Post. “However, it’s time for the administration to follow through on its word to end the federal student loan payment moratorium. This latest extension is an illegal overreach.”
The temporary freeze is rounding into its third year after first being implemented by President Donald Trump using the Higher Education Relief Opportunities for Students (HEROES) Act in March 2020, using the act’s power “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies,” the Post reported. The Trump administration extended the temporary freeze twice, but the Biden administration has since extended the deadline six times.
SoFi argues that the latest extension breaches the authority of the HEROES Act and requests the court order borrowers who are ineligible for the Biden administration’s student loan forgiveness plan to immediately begin repaying their borrowed loans.
“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 reads. “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.”
The administration’s plan would cancel $20,000 in debt for borrowers who received Pell Grants and $10,000 for those who did not receive Pell Grants. The Supreme Court heard oral arguments for the plan on Feb. 28 and is expected to issue a ruling this summer.
“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,” a DOE spokesperson told the Daily Caller News Foundation. “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 Department will continue to fight to deliver relief to borrowers, provide a smooth path to repayment, and protect borrowers from industry and special interests.”
Extending student loan repayments hurts SoFi’s business refinancing student loans, through which borrowers give up federal benefits for lower interest rates and monthly payments, according to the Post. SoFi argues that extending the pause on repayments disincentivizes borrowers to consider SoFi’s services.
“Because the Moratorium suspended payments and interest for federal student loans, and because privately refinanced loans are ineligible for programs and policies applicable to federal student loans, the Moratorium has eliminated the primary benefits of student loan refinancing,” the complaint reads. “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.”
SoFi did not immediately respond to the Daily Caller News Foundation’s request for comment.
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