SoFi drops 10% as extended moratorium on Biden student loan payments forces company to cut revenue forecast
SoFi Stockfell 10% on Thursday after the Biden administration extended the freeze on student loan repayments.
- The freeze was due to expire on May 1, but was instead pushed back to August 31.
SoFisaid he expects an additional freeze on loan repayments to occur beyond Aug. 31 as the midterm elections approach.
SoFi stock fell 10% on Thursday after the Biden administration extended its freeze on student loan repayments until August 31.
The student loan repayment freeze was due to expire on May 1. The freeze was originally put in place at the height of the COVID-19 pandemic in March 2020, as a form of relief for economically struggling consumers.
Due to the extension of the loan repayment freeze, SoFi lowered its full-year 2022 adjusted net revenue and adjusted EBITDA guidance to $1.47 billion and $100 million, respectively. The company originally forecast $1.57 billion and $180 million in adjusted net revenue and adjusted EBITDA in 2022.
SoFi maintained its original guidance of adjusted net revenue of $280-285 million and adjusted EBITDA of $0-5 million for the first quarter of 2022.
SoFi is getting a lot of business from student loan refinancing, but it’s a key product that consumers don’t really need as long as the payment freeze remains in place. SoFi’s student loan refinance business has operated at less than 50% of pre-COVID levels for the past two years, according to the company.
As SoFi wins new customers by helping them refinance their
And SoFi does not expect the student loan payment freeze to end on August 31, given the upcoming midterm elections.
“Management now expects a number of factors, including the looming midterm elections in the fall, to precipitate a likely seventh extension beyond August 2022 by the administration. Accordingly , management’s updated guidance for 2022 assumes that the student loan moratorium will not in fact end during 2022,” Sofi said.