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

Student loan repayments were initially halted at the start of the pandemic by President Donald Trump’s administration and have been extended eight times over a three-year period.

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 suspension. Student loan repayments were initially halted at the start of the pandemic by President Donald Trump’s administration. The pause was extended eight times in three years.

The bank says its federal student loan refinancing business has been hurt because borrowers have little incentive to refinance while fees and interest go unpaid. At a minimum, the lawsuit is asking the judge to limit the pause to only borrowers who would be eligible for Biden’s write-off plan.

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

The lawsuit says that unlike the first seven extensions, which were supposed to help borrowers struggling with the pandemic, the latest was made solely in response to legal challenges to Biden’s plan for widespread student debt relief. The plan is currently being appealed to the Supreme Court, which is expected to rule by June.

“The eighth extension does not even attempt to repair the damage caused by the pandemic, but rather alleviate the uncertainty caused by the debt relief litigation,” SoFi’s lawsuit says.

SoFi argues that this is not a valid excuse permitted by the HEROES Act, the federal law that the Biden administration enforced to continue the hiatus. The bank also contends that the extension violated the Administrative Procedures Act because the administration failed to get public feedback.

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

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

The Department of Education defended the legality of the gap, calling the lawsuit “an attempt by a multi-billion dollar company to capitalize on forcing 45 million borrowers to pay.”

“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 supporters of the borrower, 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 workers that SoFi will never lend to — families across the country that depend on student loan repayments that are on hold to protect themselves from financial devastation,” said Mike Pierce, Managing Director. Center for the Protection of Student Borrowers.

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

first appeared on Texas Standard News.

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