SoFi Technology (NASDAQ:SOFI) gained soon out of the starting blocks Wednesday. The financial services platform added strength on word deal to raise the U.S. debt ceiling on track for a vote on Wednesday would resume student loan payments.
The debt ceiling bill itself is good news for bank stocks and the economy in general, but there is one provision that is particularly good for SoFi.
According to the agreement, the pause in student loan repayments, which has been in effect since early 2020, will end in August. While it was set to end regardless once the Supreme Court rules on President Biden's student loan forgiveness plan, this creates a definitive end date for the first time.
SoFi has just over $5 billion in student loans on its balance sheet, but the payment pause hasn't affected private student loans like these -- just federal loans.
Within the next few weeks, the Supreme Court is widely expected to rule against the Biden Administration's student loan forgiveness program, which will likely end forbearance within 60 days. In this report, we review SoFi's business and the effects of fear (from the student loan situation, combined with recent banking sector distress caused by rapidly rising interest rates) on the company's current valuation. After discussing specific risks in more detail, we conclude with our strong opinion on investing in SoFi.
SOFI shares hiked 67 cents, or 11.2%, to $6.70.
