The payment pause on federally guaranteed student loans has helped millions of borrowers across the country, but one business has been significantly impacted by the moratorium.
After the suspension of payments was announced, “our student loan business was cut by more than half,” Anthony Noto, CEO of SoFi, told Yahoo Finance Live (video above). “It was our biggest business, it was our oldest business…this business has been operating at about 50% of pre-COVID volume for the last 20 months.”
Noto explained that SoFi Technologies Inc. (SOFI) has seen demand drop significantly from its student loan refinance business since former President Donald Trump announced a pause on all federal student loan payments in March 2020. This pause has been extended several times and is finally expiring on January 31, 2022.
The company was able to diversify into other personal finance products to offset the slowdown, he added. But the decline in demand was still severe.
About 5.3% of student loans were severely delinquent or in default, but as the government reports that all federal students are on time through Jan. 31, 2022, the number is down from pre-pandemic levels.
Demand will be back in 2022: SoFi
Noto pointed out that there is a silver lining to the student loan refinancing business.
With payments resuming in 2022, “I think there will be a significant increase in the number of those wanting to refinance their student loans,” he said, noting that rates remained at “historic lows.” .
“We’re going to see a significant increase in 2022 as people have to start repaying their student loans again,” Noto added, “and they have the opportunity to refinance with substantial savings…given the rate situation today.” today”.
Overall, student loan growth over the past decade has been historic: federal student loans grew from $642 billion in 2007 to $1.566 trillion in 2020, an increase of 144%, according to a report on the subject by the Bipartisan Policy Center (BPC). However, the number of borrowers only increased by 52% over the same period.
That’s because students are borrowing more: Between 2007 and 2020, the average amount of federal student loan debt per borrower rose from $22,680 to $36,510 in real terms, according to the BPC report.
Meanwhile, the government continues to make progress on student loan programs, most recently revising the Civil Service Loan Forgiveness Program (PSLF) in October. Many borrowers are already seeing the paperwork move faster and getting forgiveness for these actions, social media advocates say.
And data and expert analysis from the Department of Education (ED) shows that federal actions amid the pandemic between March 2020 and September 2021 led to approximately $100 billion in total student loan forgiveness.
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