After the U.S. Supreme Court struck down student loan forgiveness, the Biden Administration set out to find another way to do the job. It appears to have found that way, as earlier today, it announced that it plans to forgive $39 billion in student loans. As a result, SoFi (NASDAQ:SOFI) slipped fractionally in Friday afternoon’s trading.
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The loan forgiveness in question will go out to 804,000 different borrowers that got their loans under what are known as “income-driven repayment plans.” With those plans, student loan borrowers pay back according to a percentage of their income over the course of 20 to 25 years. The debt that’s left after those 20 to 25 years, regardless of amount, is then forgiven. Such a plan, according to the Department of Education, came with a certain amount of failure points built in, and the loan forgiveness plan addresses these points of failure.
After yesterday’s close, SoFi’s CEO Anthony Noto took to an interview with CNBC to detail the company’s stance on student loan forgiveness. On a certain level, it would be easy to think that Noto would be opposed, since it’s a direct cut to SoFi’s bottom line. But Noto noted that SoFi is a highly-diversified company, meaning that it could be valued as a bank, a technology stock, or a fintech stock. And those who need help with their student loans, meanwhile, should get it accordingly. That diversification likely kept SoFi from plunging outright instead of slipping fractionally.
Yet that same diversification is leaving analysts wary. With seven Buy ratings, seven Hold, and three Sell, SoFi stock is considered a Hold by analyst consensus. However, with an average price target of $8.41 per share, SoFi stock comes with a 7.79% downside risk.
