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- SoFi, a banking and credit company, is suing Biden administration to reverse the ongoing freeze on federal student loan payments and interest.
- The lawsuit alleges that the administration enacted the eighth and final extension of the moratorium illegally. The White House authorized it under a 2003 law known as the HEROES Act, which allows the secretary of education to unilaterally change the federal student loan system in times of national emergency. . However, the lawsuit claims it “did not attempt to remedy the damages caused by the pandemic.”
- The company also says the freeze, which first occurred in March 2020, erases the main advantages of refinancing student loans. “SoFi is forced to compete with 0% interest rate loans where ongoing principal repayment is entirely voluntary,” the lawsuit states.
Federal student loan payments are currently set to resume in August or 60 days after US Supreme Court is issuing its decision on President Joe Biden’s student loan forgiveness plan, whichever comes first. The proposal would wipe out up to $20,000 in student loan debt for some borrowers.
SoFi’s lawsuit is asking a federal judge to force borrowers who won’t qualify for the loan forgiveness program back into immediate repayment. The company expects to lose $40 million to $45 million in revenue if the payment freeze continues through August, according to the lawsuit.
The student loan reform group My, The 45 Million spoke out against the lawsuit on Tuesday.
“The lawsuit is without merit and SoFi has no standing because it has no right to anyone’s federal loans,” Melissa Byrne, the organization’s executive director, said in a statement. “SoFi had no right to have any customers. If their product does not meet current needs, they should adapt or close their doors. It’s not the government’s job to help them make money.”