What happened
SoFi Technologies (SOFI 0.26%) stock is posting huge gains this week. As of 2 p.m. ET Thursday, the fintech-services company's share price had risen roughly 30% from the previous week's market close, according to data from S&P Global Market Intelligence.
SoFi's valuation is getting a substantial boost as a bill to raise the debt ceiling moves through Congress. Following negotiations, a provision to end the temporary moratorium on federal student loan payments and interest accrual has been included in the bill. The development could kick-start SoFi's performance later this year, and investors have responded by bidding up the stock.
So what
The debt ceiling bill deal has been passed in the Republican-controlled House of Representatives, and it will very likely now pass in the Democrat-controlled Senate before being signed by President Biden. With the included provisions, it looks like the moratorium on federal student loan payments and interest accrual will end after Aug. 31.
A large portion of SoFi's credit portfolio is private student loans, which have not been subject to the same payment and interest pause that's been in place for federal loans. But with payment and interest schedules for federal student loans now on track to resume, SoFi could benefit as loan holders once again move to refinance federal loans through its platform.
Now what
Prior to the student loan pauses that were implemented in response to the pandemic, refinancing offerings for loans in the category were a significant part of SoFi's business model. With the moratorium potentially set to expire a few months from now, the fintech company could be on track to see a significant positive performance catalyst.
With this week's rally, SoFi stock is now up roughly 53% across 2023's trading. On the other hand, the company's share price is still down approximately 73% from the lifetime high that it reached in February 2021.
SOFI PS Ratio (Forward) data by YCharts
Following the recent stock gains, SoFi now trades at approximately 3.3 times this year's expected sales. While the company is not yet profitable and its stock remains somewhat risky, the business does have huge expansion potential, and it's possible that shares will deliver strong returns for patient investors.
