Hey Traders,
A cornerstone of President Biden’s election campaign was a promise to eliminate student debt.
On Friday, the Supreme Court shot down his debt relief plan.
SCOTUS disagreed that Biden has the authority to forgive loans for 40 million borrowers.
Republicans had decried the fairness of the plan and its $400 billion price tag.
The loss is a hit to a key campaign promise.
Republicans rejoiced and Democrats criticized.
Some Democrat ire was focused on Republicans.
But presidential contender Robert Kennedy stated that “The unfortunate SCOTUS ruling striking down President Biden’s #studentloan forgiveness program was the predictable result of Biden’s failure to bring Congress together on this issue of crucial importance to young Americans.”
New Plan?
SCOTUS’s decision prompted the White House to put forth a new loan forgiveness plan.
President Biden reintroduced a program to cancel up to $20,000 in student loan debt.
Biden believes this new path is legal and will hold up at the Supreme Court.
Biden’s original plan was based on the Higher Education Relief Opportunities for Students (HEROES) Act.
The White House argued that the HEROES Act allowed it to defer loan payments due to the COVID-19 pandemic.
SCOTUS disagreed.
Under the “major questions doctrine,” the Court requires that Congress give clear authorization for the executive branch to implement matters of vast economic and political significance.
Biden did not have that clear authorization.
The new effort is grounded in the Higher Education Act (HEA).
Democrats believe that the HEA allows the education secretary to compromise, waive, or release student loans, and that the move will stand up to the major questions doctrine.
Of course, the lawyers opining on the legal viability of the HEA route are the same lawyers that opined on the HEROES Act.
The new HEA path will require a public comment and notice period before it could go into effect, and the process could go to the end of 2023.
Biden also announced a 12-month on-ramp for borrowers that would remove the threat of default or harm to credit ratings because the Education Department won’t refer borrowers who miss payments to collection agencies or credit bureaus for 12 months.
Who Benefits
With the decision, many borrowers will look for options, including refinancing or restructuring loans.
One of the largest private student loan players is Sofi Bank (Ticker: SOFI).
SOFI is an online personal finance platform that caters to younger borrowers and savers, especially millennials and Generation Z.
One of SOFI’s flagship offerings is its student loan refinancing program.
The program is designed to help borrowers with existing student loan debt by consolidating multiple student loans—both federal and private—into a single loan with potentially lower interest rates.
The program stands out for its lack of fees—there are no origination fees, prepayment penalties, or late fees.
And SOFI offers both fixed and variable rate loans with flexible repayment schedules.
SOFI also provides unemployment protection.
Under that program, if a borrower loses their job through no fault of their own, they can temporarily pause payments.
SOFI has seen significant stock appreciation this year but was remarkably flat on the SCOTUS news.
Are investors still waiting out Biden’s new approach?
Cutting Through The Noise For You,
Frank Gregory
