What happened
The stock market was having a generally strong morning on Tuesday on the news that a tentative agreement had been reached to lift the debt ceiling and avoid a catastrophic default. And banking disruptor SoFi Technologies (SOFI -3.29%) was handily outperforming all of the major benchmark indexes. As of 9:50 a.m. ET today, SoFi was higher by 7%, making it one of the best-performing stocks in the financial sector.
So what
The debt ceiling bill itself is good news for bank stocks and the economy in general, but there is one provision that is particularly good for SoFi. According to the agreement, the pause in student loan repayments, which has been in effect since early 2020, will end in August. While it was set to end regardless once the Supreme Court rules on President Biden's student loan forgiveness plan, this creates a definitive end date for the first time.
Now what
SoFi has just over $5 billion in student loans on its balance sheet, but the payment pause hasn't affected private student loans like these -- just federal loans.
The reason investors are cheering this news is that student loan refinancing is a big part of SoFi's business. In fact, it was the first main focus of the business years ago. With borrowers not required to make any payments on their federal student loans for more than three years, the volume of student loan refinancing has been extremely small.
However, now that payments look set to finally restart, it could be a major growth catalyst for SoFi. There is now more than $1.6 trillion in outstanding student loan debt that could potentially be refinanced, and with 5.66 million members (more than five times the customer base that SoFi had when the pause started), there will be plenty of opportunities to cross-sell student loan products in the quarters to come.
