Student Loan Stocks Drop Ahead of Restart of Payments

Stocks of companies related to student loans have experienced a drop in value ahead of the restart of student loan payments after a three-year pause and amid the Biden administration’s efforts to cancel some of that debt.

The four stocks most closely linked to student loans include SoFi Technologies, which specializes in refinancing student loans, as well as student loan servicers SLM Corp., Navient and Nelnet, Seeking Alpha reported Thursday (Oct. 5).

Over the past three months, all four stocks have faced challenges, with SLM dropping 20%, SoFi falling 13%, Navient declining 10% and Nelnet dipping 9.3%, according to the report. In comparison, over the same period, the S&P 500 index slipped by about 4%.

However, it is worth noting that the three-year returns for these student loan stocks present a different story, per the report. SLM gained 68%, Navient rose 118%, and Nelnet increased 43%, all surpassing the S&P 500’s 24% increase. SoFi, which became a public company on June 1, 2021, has seen its stock drop by 29% since then.

This report comes a day after the Biden administration canceled $9 billion in debt for 125,000 student loan borrowers, providing this debt relief at a time when student loan payments restart after a three-year hiatus that began during the pandemic.

With this latest move, the administration has forgiven $127 billion in student loans to date — a fraction of the roughly $1.7 trillion owed by the nation’s student loan borrowers.

During a July earnings call, SoFi CEO Anthony Noto said that the resumption of student loan repayments and the striking down of one of the administration’s attempts to extend student loan forgiveness represents a significant opportunity for SoFi in terms of refinancing that student debt.

SoFi Chief Financial Officer Chris Lapointe added during the earnings call that student loan originations were down 1% year over year and home loans by 27% year over year, “as macro factors continued to provide headwinds to these businesses.”

As the resumption of student loan payments neared, Wall Street also anticipated an impact on companies that are reliant on discretionary spending from those borrowers. Sell-side firms on Wall Street downgraded their assessments of select names that may endure some revenue headwinds in the months ahead.