by WASHINGTON — A private bank is trying to force the Biden administration to end its pause on federal student loan paymentsarguing that the moratorium has no legal basis and has cost the bank, known for its refinancing business, millions of dollars in profit.
In a federal lawsuit filed Friday in Washington, SoFi Bank NA has asked a federal judge to strike down President Joe Biden’s latest pay pause extension. Student loan payments were first halted at the start of the pandemic by the administration of President Donald Trump. The hiatus has been extended eight times in three years.
The bank says its federal student loan refinancing business has suffered because borrowers have little incentive to refinance. while payments and interest remain on hold. At a minimum, the lawsuit asks a judge to limit the pause to only borrowers who would be eligible for Biden’s payoff plan.
Biden’s latest extension, which was announced in November and could run until this summer, is illegal for “multiple reasons,” the lawsuit claims.
Unlike the first seven extensions, which were meant to help borrowers struggling as a result of the pandemic, the latest one was enacted solely in response to legal challenges to Biden’s plan for sweeping student debt forgiveness, the agency says. demand. The plan is currently being challenged in the Supreme Courtwhat is expected rule in june.
“The eighth extension is not even attempting to repair the damage caused by the pandemic, but rather to alleviate the ‘uncertainty’ caused by the debt cancellation litigation,” SoFi says in the lawsuit.
SoFi argues that this is not a valid reason authorized by the HEROES Act, the federal law that the Biden administration has invoked to continue the hiatus. The bank also argues that the extension violated the Administrative Procedure Act because management did not solicit public comment.
The most recent extension has cost the bank at least $6 million in lost profit, SoFi says, and could lead to a total of $30 million in losses if it continues through August.
“In essence, SoFi is forced to compete with loans with 0% interest rates and for which any continued repayment of the principal is entirely optional,” the lawsuit says.
The Department of Education defended the legality of the pause, calling the lawsuit “an attempt by a multibillion-dollar company to make money while forcing 45 million borrowers to pay again.”
“The department will continue to fight to provide relief to borrowers, provide a smooth path to repayment, and protect borrowers from industry and special interests,” the agency said in a statement.
The lawsuit drew swift condemnation from borrower advocates, who called it a theft of money at the expense of those struggling with student debt.
“The real story here is the enormous risk this poses to tens of millions of workers to whom SoFi would never lend: families across the country who rely on student loan repayment pauses to protect themselves from financial devastation,” he said. Mike Pierce, executive. Director of the Student Borrower Protection Center.
