SoFi Bank has sued the Biden administration in federal court, arguing the pause on student loan repayment is unlawful and has cost the private bank millions of dollars.
SoFi Bank N.A. filed the lawsuit Friday in the U.S. District Court for the District of Columbia, asking a judge to halt President Biden’s latest extension of the student loan pause first put into place by former President Donald Trump during the COVID-19 pandemic in 2020.
The suspension of payments has been extended more than half a dozen times — with repayments set to return this summer.
SoFi argues borrowers aren’t refinancing while the payments and interest are on pause, leading the bank’s business to suffer and the company to see at least $6 million in lost profits since the latest extension in November.
SoFi also argues that the only borrowers who should have a pause on their loans are those who may qualify for the president’s debt relief plan, which the Supreme Court is reviewing. A decision in that dispute is expected by June.
“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,” the bank argued in its 32-page complaint.
The bank asked the court to halt the latest extension — the eighth one since the pandemic hit — so that repayments start back up.
The Education Department said the lawsuit was “an attempt by a multi-billion dollar company to make money while they force 45 million borrowers back into repayment.”
“The department will continue to fight to deliver relief to borrowers, provide a smooth path to repayment and protect borrowers from industry and special interests,” it said in a statement, according to The Associated Press.
The case was assigned to Judge Tanya S. Chutkan, an Obama appointee.
Josh Blackman, a professor at South Texas College of Law, said a ruling from the Supreme Court against the president’s student loan forgiveness plan could give SoFi a quick win.
In August, the president revealed plans to cancel up to $20,000 of student debt per borrower for those who earn less than $125,000 a year — or $250,000 for married couples.
The president cited as support for his move the HEROES Act, which was passed after the Sept. 11, 2001, terrorist attacks and gave the executive branch authority to forgive certain debts regarding the military during emergencies.
The Biden administration says the COVID-19 pandemic is considered an emergency under the law, applying it to student loan borrowers.
One issue the justices explored during oral arguments last month in the case, which was brought by a group of red states and borrowers, was whether they had standing — or legal injury — to sue. Mr. Blackman said if the court decides they did not, SoFi could be the entity to successfully challenge the administration.
“If the Supreme Court holds that the Biden policy is illegal, that could put SoFi on a fast-track to getting a judgment later. But if the Supreme Court finds there is no standing, SoFi could litigate the case up,” he said.
— This article is based in part on wire-service reports.