SoFi Withdraws Lawsuit to End Student Loan Payment Pause

The California-based bank and the federal government mutually agreed to end the lawsuit after President Joe Biden signed the Fiscal Responsibility Act of 2023, which ends the payment pause.
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Matthew Arrojas is a news reporter at BestColleges covering higher education issues and policy. He previously worked as the hospitality and tourism news reporter at the South Florida Business Journal. He also covered higher education policy issues as...
Published on June 6, 2023
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  • California-based SoFi Bank is no longer interested in ending the student loan payment pause through the court system.
  • This comes after a recent debt ceiling deal cemented an end to the payment freeze on August 29.
  • Most borrowers have not needed to make a payment on their loans since March 2020.

SoFi Bank has decided that its lawsuit seeking to end the pause on federal student loan payments is no longer necessary.

The California-based bank on Monday filed to withdraw its lawsuit seeking to end the pause. SoFi stated in the filing that after meeting with the Department of Education (ED), both sides agreed that the lawsuit is no longer relevant due to the recent passage of the Fiscal Responsibility Act of 2023.

That bill raises the debt ceiling, which prevents the U.S. government from defaulting on its loans. As part of a compromise with Republican Speaker of the U.S. House of Representatives Kevin McCarthy, President Joe Biden included an end to the three-year-long pause on federal student loan payments.

Biden signed the bill into law on Saturday, meaning the payment pause will now end on Aug. 29.

SoFi is a leader in student loan refinancing, which allows borrowers to refinance loans into a single loan, potentially at a more favorable rate.

The bank filed a lawsuit in federal court last March, alleging that ED's eighth extension, issued in late last November, was unlawful. According to that filing, SoFi has lost more than $300 million in total revenues from its federal loan refinancing business since the moratorium on payments went into effect in March 2020.

Now that an end to the payment pause is solidified, the corporation appears to see no point in continuing the lawsuit.

"The parties have met and conferred and agree that, in light of the Fiscal Responsibility Act of 2023, this matter should be dismissed without prejudice," SoFi wrote in its latest filing.