Student rates

Could the student loan moratorium move the markets?

The outstanding federal loan portfolio is still over $1.611 trillion, with 43.4 million borrowers carrying the weight of an average balance of $37,113 on their shoulders. That’s a lot of money that most people can’t imagine paying even in pre-pandemic times. Throw a global crisis that has since crippled the economy into the mix, and paying off those loans seems like an almost impossible feat.

That’s why the White House put a pause on federal student loans at the start of the COVID-19 crisis, and now the Biden administration is extending that repayment freeze from its scheduled May 1 expiration date to May 31. august.

The decision to extend the student loan moratorium has rattled some stocks, leaving investors wondering what will happen next. But could the extension really benefit borrowers and bigger stock Exchange ?

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In a statement Wednesday, President Joe Biden acknowledged that “we are still recovering from the pandemic and the unprecedented economic disruption it has caused,” even despite the economy being stronger than it looks. was around this time last year. In other words: there is still a lot of work to do and “this extra time will help borrowers achieve greater financial security and support the Department of Education’s efforts to continue to improve student loan programs” so that the economy is struggling through difficult times. .

It’s not the first time Biden has pushed back the pause, meaning borrower balances have been frozen for more than two years, with no interest or collections on defaulted debt since March 2020.

In response to the Biden administration’s decision, SoFi Technologies shares fell more than 11% Thursday. The fintech platform offers private student loans and refinance options for undergraduates, graduate students, and their parents.

In a statement on Wednesday, the company said it expected the moratorium to be extended again and that “the looming midterm elections in the fall will likely precipitate a seventh extension beyond August.” And, for that reason, he “assumes that the student loan moratorium will not in fact end sometime in 2022.”

As a result, SoFi is cutting its 2022 adjusted sales and earnings guidance to $1.47 billion and $100 million, respectively, according to a statement of the society. That’s $10 billion and $80 million lower than its previous forecast.

“SoFi remains incredibly well positioned to deliver continued strong revenue, membership and revenue growth, as well as continued and improving profitability, despite our student loan refinance business operating at less than 50% of pre-Covid levels for the past two years,” Anthony Noto, CEO, said optimistically in the statement. “SoFi has done an outstanding job of achieving record financial results, member and revenue growth, and consistent profitability, despite the negative impact of the extended student loan payment moratorium. We will work diligently to continue this trend in 2022.”

But while the pause on student loan debt affects lenders and fintech companies that directly service the student loan space, this move could mean more positive news for markets as a whole. Helping students become more financially secure can help give them more purchasing power, which impacts the economy, which ultimately affects the stock market.

Because the Federal Reserve is currently struggling to combat record inflation rates, giving people more spending capacity doesn’t seem like such a bad idea. Especially considering that too many millennials won’t even consider homeownership (which hurts the housing market) because they can’t afford it… because they have crushing student loan debt.

When people are trying to pay off debt, spending on a home — or planning a vacation to revive the struggling travel industry, or eating out to help struggling family restaurateurs — isn’t necessarily a priority. So many industries need monetary support in the post-pandemic era, but too many people can’t afford to spend their coveted savings between their student loans and all the other costs COVID has put on them.

While the world waits for student loans to follow, you can diversify your portfolio to deal with stock fluctuations and market movements. offers an Emerging Tech Kit so you can invest in the tech space without trying to pick which stocks you think will succeed or sink. Or you can explore the inflation kit to work on minimizing risk in today’s volatile market environment.

Download for iOS for more investment content and access to over a dozen AI-powered investment strategies. Start with just $100 and never pay any fees or commissions.