Lending stocks are getting a boost Thursday after President Joe Biden on Wednesday outlined plans to forgive a portion of federal student debt for qualified borrowers and announced the freeze on repayment will be extended one final time to the end of the year.
Some of the names participating in the two-day rally include SoFi Technologies Inc (NASDAQ:SOFI), LendingTree Inc (NASDAQ:TREE), LendingClub Corp (NYSE:LC) and Upstart Holdings Inc (NASDAQ:UPST).
LendingTree is making the biggest move of the group Thursday. The stock was up more than 7% at the time of writing, according to Benzinga Pro.
Lending Tree director Mark Ernst purchased 10,000 shares of the company at an average price of $34.68 this week, per a Form 4 filing with the SEC.
Student Loan Relief Plan: The Department of Education will provide up to $10,000 in federal student debt cancellation for individuals with annual income below $125,000, and up to $20,000 in debt cancellation for Pell Grant recipients, according to the White House.
Biden also announced the pause on federal student loan repayment will be extended one final time through Dec. 31, and said borrowers should expect to resume payment in January 2023.
The student loan repayment pause has been in place since the start of the pandemic in early 2020. The freeze has caused a slowdown in student loan businesses. With an end date now in sight, student loan refinancing businesses should stand to benefit.
Related Link: Biden Lays Out Student Loan Relief Plan: Do You Qualify For Forgiveness?
What It Means For SoFi: Student loan refinancing makes up a large part of SoFi's business. It was one of the first products introduced by the company when it launched in 2011.
SoFi CEO Anthony Noto talked about the opportunity in front of the company Thursday on CNBC's "TechCheck," suggesting that SoFi should start to see an uptick in refinancing sooner rather than later.
"For those that are eligible for the $10,000 of forgiveness, they can refinance their remaining amount now while rates are still low," Noto said.
"The market anticipates that rates could increase 100 to 150 basis points by the end of this year, which is when the moratorium ends, and so there's a substantial cost savings today that could go away if people wait."
There's also a large group of people that have been holding out waiting years for student loan forgiveness, he said.
"[Biden] made a very decisive decision on the forgiveness, so now that frees those people up to understand what they have to pay back and they can start on the march," Noto said.
The SoFi CEO told CNBC that Biden's announcement was "pretty much in line" with what the company anticipated when it raised guidance for the back half of the year in its earnings report at the beginning of the month.
"The most important thing is we have a pretty diversified business and we've been able to grow 50% year-over-year and set five consecutive quarters of record revenue because we've diversified into checking and savings and brokerage. So this will be additive to that," Noto said.
SOFI Price Action: SoFi has a 52-week high of $16.47 and a 52-week low of $4.82.
The stock was up 1.63% at $6.56 on Thursday following a 5% move higher on Wednesday.
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