SoFi claims that the Biden administration’s extension of the student loan repayment pause has inflicted “irreparable” damage to its bottom-line.
SoFi Bank has filed a lawsuit seeking to overturn the Biden administration’s final extension to the student loan repayment pause.
In its lawsuit, attorneys for the private lender claim that the administration’s extension is unlawful and harms SoFi’s student loan refinancing business.
According to The Washington Post, the lawsuit was filed late last week in U.S. District Court for the District of Columbia.
SoFi alleges that Department of Education erred by extending the student loan repayment pause while challenges to a debt relief program are considered by the United States Supreme Court.
However, SoFi and its attorneys say that the Department of Education’s explanation is inadequate and in violation of the 2003 Higher Education Relief Opportunities for Students Act, which the federal government has cited in extending the repayment pause.
“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.”
A spokesperson for the Department of Education, however, said that the repayment pause is legal and grounded in well-established precedent.
“This lawsuit is an attempt by a multibillion dollar company to make money while they force 45 million borrowers back into repayment—putting many at serious risk of financial harm,” the department said in a statement reprinted by the Post.
The Washington Post notes that the HEROES Act authorizes the federal education secretary “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.”
The Trump administration first introduced repayment pauses during the coronavirus pandemic; Congress later codified the reprieve in the CARES Act, making extensions to the period automatic.
While the Trump administration extended the repayment pause twice, Biden has done so six times, justifying its actions by saying that borrowers are continuing to recover from the economic aftermath of a significant public health crisis.
However, SoFi claims that extending the moratorium while the Supreme Court assesses the legality of the broader program is improper.
“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 wrote in the lawsuit. “Every day that the eighth extension of the loan moratorium remains in place, it causes significant, irreparable harm to SoFi.”
Mike Pierce, executive director of the Student Borrower Protection Center, has criticized SoFi’s lawsuit, saying that the company is threatening to thrust millions of Americans into financial peril to buffer its bottom line.
“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 told the Post.