The payment pause on federally-backed student loans has been helpful to millions of borrowers across the country, but one company has been hit substantially by the moratorium.
After the payment pause was first announced, "our student loan business got cut in more than half," SoFi CEO Anthony Noto told Yahoo Finance Live (video above). "It was our largest business, it was our oldest business ... that business has been running at about 50% of the pre-COVID volume for the last 20 months."
Noto explained that SoFi Technologies Inc. (SOFI) saw demand drop off substantially from its student loan refinancing business since former President Donald Trump announced a pause on all payments on federal student loans in March 2020. That pause has been extended multiple times and is finally set to expire on January 31, 2022.
The company was able to diversify into other personal finance products to offset the slowdown, he added. But the dip in demand was still severe.
About 5.3% of student loans were in serious delinquency or default, but since the government is reporting all federal students as on-time until January 31, 2022, the number is lower than pre-pandemic levels.
Demand will be back in 2022: SoFi
Noto stressed that there is a silver lining to the student loan refinancing business.
With payments resuming in 2022, "I do think there will be a significant increase in those that want to refinance their student loans," he explained, noting that rates remained at "all-time lows."
"We are going to see a significant uptick in 2022 given that people have to start paying their student loans again," Noto added, "and they have an opportunity to refinance at substantial savings... given where rates are today."
Overall, the growth of student loans over the past decade has been historic: Federal student loans have grown from $642 billion in 2007 to $1.566 trillion in 2020 — a 144% increase, according to a report on the topic from the Bipartisan Policy Center (BPC). The number of borrowers, however, has only increased by 52% over the same period.
That's because students are borrowing more: Between 2007 and 2020, the average amount of federal student loan debt per borrower has increased from $22,680 to $36,510 in real terms, the BPC report stated.
Meanwhile, the government continues to make progress on student loan programs, most recently by overhauling the Public Service Loan Forgiveness (PSLF) program in October. Many borrowers are already seeing paperwork move faster and getting forgiveness from these actions, according to advocates on social media.
And Education Department (ED) data and expert analysis show that federal actions amid the pandemic between March 2020 and September 2021 have led to roughly $100 billion in total student loan forgiveness.
Aarthi is a reporter for Yahoo Finance. She can be reached at email@example.com. Follow her on Twitter @aarthiswami.