Shares of
Navient
and other companies that handle student loans ended Thursday higher after the Senate voted to block President Joe Biden’s student loan forgiveness plan.
The administration’s plan would forgive up to $20,000 a person in federal student loans for more than 40 million borrowers. The bill passed Thursday undoes that proposal and now heads to the president’s desk, where he has vowed to veto it.
The vote was largely symbolic, as the House of Representatives and Senate likely won’t be able to overturn a veto. Biden’s loan forgiveness plan has also been stuck in courts. The Supreme Court is expected to rule on it later this month.
Shares of Navient (ticker: NAVI) ended the day 4.1% higher, while
Nelnet
(NNI) and
SLM
(SLM) both closed 1.6% higher.
SoFi Technologies
(SOFI) was initially higher on the day, but closed 1.7% lower.
The debt-ceiling deal is also a factor for these companies. The measure includes a provision to restart federal student loan repayments that have been paused for more than three years because of the Covid-19 pandemic. The provision would end that moratorium by Aug. 29. The House passed the bill Wednesday, and the Senate is expected to vote on the deal before Monday.
For SoFi, which issues student, home, and personal loans to consumers, the moratorium had eliminated key benefits of private student loan refinancing, which can include lower interest rates and longer loan periods. The company’s student-loan originations business had collapsed, generating $525 million in the first quarter of 2023, compared with $2.4 billion in 2019’s fourth quarter, just before the pandemic.
SoFi’s stock took a hit last month after earnings showed it didn’t sell any loans within its personal-loan and student-loan refinancing segments in the first quarter. The stock has fallen 48% over the past year.
SoFi sued the federal government in March, alleging that the pause directly harmed its refinancing business.
Loan services aren’t the only stocks affected. Target stock (TGT), which has dropped for 10 consecutive days, could fall further when student loan repayments start up again, wrote J.P. Morgan analyst Christopher Horvers. Because Target’s shoppers are mostly millennials, carrying more student loan debt than other demographics, he sees a “risk of downward earnings revisions.”
Write to Janet H. Cho at [email protected]
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