Federal student loan debt repayments are expected to resume later this year — and one winning stock could emerge from the fallout, according to Bank of America. Payments on federal student loans have been on hold since 2020 as part of pandemic relief measures. With the average bill coming in at about $400 a month , borrowers have enjoyed a lot of flexibility in their budgets while the payments have been paused. Nationwide, outstanding student loan debt stood at $1.604 trillion in the first quarter of 2023, according to the Federal Reserve Bank of New York . Now, an end to repayment relief hangs over borrowers’ heads. The Supreme Court is weighing President Joe Biden’s student loan forgiveness plan, and repayments on federal student loans are expected to resume 60 days after the court makes its decision. If the case hasn’t been resolved by June 30, payments will restart 60 days later, on Aug. 29. That spells bad news for borrowers’ budgets. “The resumption of a monthly obligation that has been suspended for three+ years could pressure consumer finances and weaken credit performance on other loans,” said Bank of America analyst Mihir Bhatia in a report Tuesday. But SoFi Technologies could benefit from the resumption of loan payments as borrowers try to refinance their federal student loans, Bhatia said. “Although investors will also want to keep an eye on SOFI’s personal loan portfolio, which has been growing on balance sheet in recent quarters,” he added. Refinancing may make sense if the original federal loans have a higher rate than what’s available through a private lender. But participating borrowers miss out on certain features if they refinance — including access to income-driven repayment plans and the Public Service Loan Forgiveness program, which is available to borrowers who work in public service. — CNBC’s Michael Bloom contributed to this report.
This story originally appeared on CNBC
