Students will have to start paying off debt for the first time in over three years as part of the new debt ceiling.
A prospect has submitted stock in SoFi (SOFI). One of the nation’s leading student loan lenderssurged Wednesday as Wall Street grew more confident of a deal.
“This is a gradual move for SoFi as borrowers will need to start making payments again and some may consider extending loan terms through SoFi’s student loan refinancing product, which has seen loan volumes stagnant since the beginning of the grace period. We expect it to be positive in 2020,” David Chiavellini, managing director of Wedbush Securities, wrote in a note to clients Wednesday.
SoFi originally planned to lift the moratorium on June 30, as planned, but the debt ceiling deal has since the government first suspended federal student loans as part of the pandemic relief benefits. , the moratorium on student loans that have been extended many times could be finalized. March 2020.
This extension changed SoFi’s business forever. In the first quarter of 2023, SoFi’s student loan balances were down more than 50% from pre-pandemic levels, according to a company release. The student-loan segment accounted for nearly 30% of his loan volume in the first quarter of 2022, but just 15% in the first quarter of 2023.
“Federal student loan forbearance continues to weigh on our business,” the company said in its first-quarter release on May 1.
The suspension of student loans has contributed to the economic downturn surrounding the stock price of SoFi, a tech-focused personal finance company that will go public in 2021. After an initial rally in the post-IPO months, the stock has fallen from its November 2021 high.
But positive sentiment about student loans rallied on Wednesday, sending shares up nearly 13%.
SoFi CEO Anthony Noto explained on the company’s recent conference call that he sees SoFi in the student loan business from two perspectives. The company offers direct private student loans and also offers refinancing options for students.
SoFi is one of several private options that compete with public student loans. Despite the government’s consistent involvement in the student loan process, Noto and Sophie still see opportunities in the sector this year.
“Given today’s loan pricing, we believe there is still a significant amount of TAM that we can pursue,” Noto said on the company’s recent conference call. “So we can certainly see an increase in demand, but he probably won’t reach the levels we saw in the fourth quarter of 2019.”
Noto said rising interest rates would limit near-term profits. But when interest rates return, Noto argues, there will be even more demand to refinance student loans.
Noto said at the JPMorgan Global Technology, Media and Communications Conference on May 24, “What we’ve seen when interest rates are low is that people are refinancing their federal loans to lower interest rates and they’re there. It means our student loan refinancing business is really profitable because we can earn savings.” So that business will be very strong even in a low interest rate environment.
Josh is a reporter for Yahoo Finance.
Click here for the latest stock market news and in-depth analysis, including events that move stock prices
Read the latest financial and business news from Yahoo Finance
