Today's video focuses on Sofi Technologies (SOFI +1.23%) and how the extension of the student loan payment pause may impact its lending segment. Here are some highlights from the video.
- As student loan interest rates remain at zero for federal loans, it eliminates the incentives for borrowers to move into a private loan like Sofi, which can provide competitive rates during a regular interest market. In 2018 and 2019, student loan originations were over $6.5 billion for Sofi. In 2020 when federal student loans started pausing interest payments, it dropped to $4.9 billion, and in its trailing 12 months, it has fallen to $3.8 billion.
- Investors should note that this will have no impact on Sofi's guidance. The upcoming quarter is closing at the end of December, and the previous extension went until Jan. 31. Analysts' guidance could be impacted as they might have included student lending revenue starting on Feb. 1 in part of their projections.
- Despite the slowdown in its student lending, Sofi has seen strong growth in its home lending and personal lending within its lending segment. The contribution profits from its lending segment have grown to $117 million, up from $103 million a year ago.
Click the video below for my full thoughts and analysis.
*Stock prices used were the closed-market prices of Dec. 22, 2021. The video was published on Dec. 22, 2021.
