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.
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.
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.”“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.
“Every day that the eighth extension of the Loan Moratorium remains in place, it causes significant, irreparable harm to SoFi,” the company said. “In essence, SoFi is being forced to compete with loans with [zero] percent interest rates and for which any ongoing repayment of the principal is entirely optional.”
Biden Grants Another Moratorium Extension
The moratorium on student loan payments, which has been in place for roughly two years and has been extended multiple times, was initially scheduled to expire on Dec. 31, and federal student loan repayments were set to resume on Jan. 1, 2023.At the time, the DOE said the extension was put in place to allow the Supreme Court time to review and rule on lawsuits brought against Biden’s student loan debt relief program. The Supreme Court is expected to make a ruling on the matter by June.
Biden announced his student-loan forgiveness plan in August last year. Under that program, up to $10,000 in student loan debt for individuals making less than $125,000 or households with less than $250,000 in income would be canceled while as much as $20,000 for eligible borrowers who were also Pell Grant recipients would be wiped out.
The Biden administration has argued that the moratorium on student loan payments can only be lifted in tandem with his debt relief program
“If the program has not been implemented and the litigation has not been resolved by June 30, 2023—payments will resume 60 days after that,” the DOE said in November.
Responding to the lawsuit, a spokesperson for the DOE said the payment pause is legal and defended the administration’s “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.”
The Epoch Times has contacted the Department of Education for comment.
