Trying to figure out student loan debt was one of the biggest problems of the COVID-19 era. With businesses closed or working remotely and the economy in shambles, legislators at the time thought it a smart move to quietly defer student loan payments until normalcy could return. Now, those days are done, and SoFi Technologies (NASDAQ:SOFI) is down in Friday afternoon’s trading thanks to a Supreme Court ruling that puts borrowers back on the hook.
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That might seem counterintuitive, and for a while, it was. SoFi gained 3.3% not long after the ruling came down, but it lost all those gains and forged new losses thereafter. The ruling, by 6-3 decision, was that the Department of Education did not, in fact, have the authority to forgive student debt. The department asserted that it did, as part of the HEROES Act, but the Court said otherwise.
The department contended that it does have the power to “waive or modify” student loan programs as part of an emergency. But the majority opinion noted that debt cancellation is neither a waiver nor a modification. “Waiver” was removed from consideration because it fundamentally changes “existing provisions.” Meanwhile, “modification” was also right out, as the opinion noted, because it represents “…the introduction of a whole new regime.” The reaction was swift and brutal, with the Student Borrower Protection Center calling it an “…absolute betrayal to 40 million student loan borrowers….”
Despite this unexpected hit to SoFi, however, analysts are only somewhat split on its overall fate. With seven Buy ratings, eight Holds, and two Sells, the end result on SoFi stock is a consensus rating of Moderate Buy. However, with an average price target of just $8.71, SoFi stock can only offer 3.88% upside potential.
