Yeah, not at Tuesday though, I didn't expect $7 even today though. I'd suggest to be careful.
I worry a lot of this move is from traders jumping off most of the stocks that will be hurt from the student loan moratorium ending (less money in the economy) and jumping to the stock that is being pumped in the media as the big beneficiary of the moratorium ending.
This could result in a "buy the rumor, sell the news" sell off, but who knows. I just don't see student loans being worth that much fundamentally.
My apologies if I'm misinterpreting this but SL's only slow down profitability if they are taking away from PL. Currently that would not be an issue I believe? As of the Q1 10Q they had1.87B of SL warehousing available which they could be using against to write those SL. As you stated those loans would not be as profitable but its a "better than nothing" situation
Slow down in a manner that the money that will be put into SLs could have been put in PLs and returned quite a bit more profit.
If they decide to tap into the 2.3B of warehouse facilities for student loans then it would be great but I am not so sure that they will. The interest on those warehouses is 5.42% - 6.66%, it will be costly and adding 0.4% default rate on top of that leaves very little for interest profit.
Sofi did start out as a student loan company but has morphed into an incredible all-in-one online bank đŚ it has proven that despite its largest source of income was taken due to the Student loan pause it came out stronger then before!
Itâs ironic that now people are saying that S/Lâs
Coming back is a bad look for SoFi, I totally disagree, yes the stock might not rally on this news but it is a big part of Sofi coming back and that is great news!
What are the rates for the new student loans? I think those may be the only ones that would refinance. A few years ago rates were so low I think the student loan interest rate was around 7%, would be hard for sofi to offer a better rate for those loans
Itâs a positive, Iâll take it. Sofi said they lost ~150-200mil revenue over the course of the pause.
Even ~10 mil extra per quarter would have gotten us profitable faster. Now we will be profitable and have extra revenue, so a better PE ratio.
More positives are coming.
It would have gotten SoFi to profitability faster because they wouldn't lose the business for 2 years and be forced to spend a lot more on marketing.
But as I've displayed, a dollar put in student loans is worth less than a dollar put in personal loans, meaning student loans takes away from profitability compared to personal loans.
Yes but with each quarter they are growing the low interest capital available via deposits and at some point there wonât be sufficient demand for PLs so having student loans will make them a more efficient business overall. And as others have said getting customers in at that stage will pay HUGE dividends down the line if they can convert them to lifetime customers (ie the flywheel). Yes, maybe student loans restarting isnât the catalyst that will send SoFi âto the moonâ in the short term, but it has been a significant headwind that I for one will be relieved to see removed from our sails.
Absolutely, diversity is important. But right now there doesn't seem to be that much of an issue with demand. SoFi still rejects 70% of applications.
And I definitely agree about getting rid of this headwind is great.
Right now it is yeah, but capturing life long customers is worth more than a personal loan, that due to interest rates is worth more today - it wonât always be that case
I completely agree about the life long members, I also added it as a positive in the bottom of the post. Regarding personal loans providing higher NIM than student loans, this will likely always be the case as it comes down to risk. Personal loans are riskier than student ones so the rate is higher.
This article talks about litigation for student loans. https://finance.yahoo.com/news/biden-and-mccarthy-have-a-debt-ceiling-deal-heres-whats-in-it-123629857.html
What litigation is this? SoFiâs? If it is then I am shocked. What if sofi withdraws??
Great post!
But actually for me, the return of student loans is not primarily about financial gains for now.
It's more about gaining recognition and dispelling the misconception that SoFi is only about student loan refinancing.
That doesn't mean I'm expecting the stock to be $8 by next week, it's just a sign of relief that it's finally over and it may help SoFi to break free from the myth once and for all.
I get that student loans will boost revenue a bit, and is the current narrative driving the stock price increase.
However, ***profitability*** is what will drive the stock to new heights. And that is coming soon!
But then, remaining without student loans for longer would distance SoFi from the image of being a student loan company only. The return of student loans is kinda counter that notion, no?
Not really, because it wonât be relevant anymore, so why fighting it? getting rid of stuff that can negatively impact the stock price is always a good thing.
Love the article and the data. Just curious on where you got the loan sale data from?
I am assuming there are fees that sofi collects for each loan originated that should add up to income for new and refinanced loans? I expect refinances to be non existent of course for a while.
Also, they are low delinquent loans so considered as good diversification especially in a recessionary environment. Even if Sofi makes less profit, it still adds up. Sure, it reduces margins but it should help build more reliability into the whole story and adds up to higher EPS than what it is today?
SoFi reports the sales and the margins in the 10Q reports. I was lazy so I took FY numbers from the 10Ks rather than the quarterly.
https://preview.redd.it/pal1616qfp2b1.png?width=1330&format=png&auto=webp&s=d9a7e8bd627415e8eb9b125331c8c0a220f31898
The TAM would be limited. Perhaps an extremely low amount of students with actually higher rate than now that it would be useful for them to refinance to reduce their rate. Noto said last year that there is still a large TAM for refinancing of students who want to reduce their monthly payments (extend the loan) rather than reduce the interest, but the fed hiked like 3 times more after that.
SoFi doesn't charge origination fee but they do earn some servicing fee I believe, they don't fully earn it because their servicer is Mohela.
More loans add to profitability, regardless if the profit is 6% or 3%, but 6% (personal loans) would be better because they push to profitability faster.
Yes I expect low volume on refinances. However, tons of students will take new loans this year (perhaps about to start for the new school year). There was no incentive for them to take a lower rate sofi loan when federal govt is telling them that they don't have to pay loans and they might also waive portions of their loan amounts if they have federal govt loans.
Thank you for this. Too many people havenât realized this. Thatâs why even though the pause hurt it hasnât hurt as much as people think. I almost think it was good as it increased the awareness that SOFI is not just a student loan company.
I don't entirely agree because of the amount of profit SoFi could have made during 2020 and 2021 from student loans. But yeah, perhaps it gave it some distance from being "student loan refinancing company".
Thank you. I lowered my expectations, and they were thoroughly surpassed today!
My expectation was lower than 10% move. đ It is important to be grounded though, I think this move is move psychological than fundamental.
>SoFi is likely not going to $6 or $7 on Tuesday We're at $7.
Yeah, not at Tuesday though, I didn't expect $7 even today though. I'd suggest to be careful. I worry a lot of this move is from traders jumping off most of the stocks that will be hurt from the student loan moratorium ending (less money in the economy) and jumping to the stock that is being pumped in the media as the big beneficiary of the moratorium ending. This could result in a "buy the rumor, sell the news" sell off, but who knows. I just don't see student loans being worth that much fundamentally.
Correct. Better to be cautious right now. Though I am enjoying this little run.
My apologies if I'm misinterpreting this but SL's only slow down profitability if they are taking away from PL. Currently that would not be an issue I believe? As of the Q1 10Q they had1.87B of SL warehousing available which they could be using against to write those SL. As you stated those loans would not be as profitable but its a "better than nothing" situation
Slow down in a manner that the money that will be put into SLs could have been put in PLs and returned quite a bit more profit. If they decide to tap into the 2.3B of warehouse facilities for student loans then it would be great but I am not so sure that they will. The interest on those warehouses is 5.42% - 6.66%, it will be costly and adding 0.4% default rate on top of that leaves very little for interest profit.
Sofi did start out as a student loan company but has morphed into an incredible all-in-one online bank đŚ it has proven that despite its largest source of income was taken due to the Student loan pause it came out stronger then before! Itâs ironic that now people are saying that S/Lâs Coming back is a bad look for SoFi, I totally disagree, yes the stock might not rally on this news but it is a big part of Sofi coming back and that is great news!
What are the rates for the new student loans? I think those may be the only ones that would refinance. A few years ago rates were so low I think the student loan interest rate was around 7%, would be hard for sofi to offer a better rate for those loans
just came here to say i like your avatar. very nice
Hah, thanks, I like yours too :)
I'll take any positive news at this point. At the least it may hold the stock at over $5.
Itâs a positive, Iâll take it. Sofi said they lost ~150-200mil revenue over the course of the pause. Even ~10 mil extra per quarter would have gotten us profitable faster. Now we will be profitable and have extra revenue, so a better PE ratio. More positives are coming.
It would have gotten SoFi to profitability faster because they wouldn't lose the business for 2 years and be forced to spend a lot more on marketing. But as I've displayed, a dollar put in student loans is worth less than a dollar put in personal loans, meaning student loans takes away from profitability compared to personal loans.
Yes but with each quarter they are growing the low interest capital available via deposits and at some point there wonât be sufficient demand for PLs so having student loans will make them a more efficient business overall. And as others have said getting customers in at that stage will pay HUGE dividends down the line if they can convert them to lifetime customers (ie the flywheel). Yes, maybe student loans restarting isnât the catalyst that will send SoFi âto the moonâ in the short term, but it has been a significant headwind that I for one will be relieved to see removed from our sails.
Absolutely, diversity is important. But right now there doesn't seem to be that much of an issue with demand. SoFi still rejects 70% of applications. And I definitely agree about getting rid of this headwind is great.
đ
Right now it is yeah, but capturing life long customers is worth more than a personal loan, that due to interest rates is worth more today - it wonât always be that case
I completely agree about the life long members, I also added it as a positive in the bottom of the post. Regarding personal loans providing higher NIM than student loans, this will likely always be the case as it comes down to risk. Personal loans are riskier than student ones so the rate is higher.
This article talks about litigation for student loans. https://finance.yahoo.com/news/biden-and-mccarthy-have-a-debt-ceiling-deal-heres-whats-in-it-123629857.html What litigation is this? SoFiâs? If it is then I am shocked. What if sofi withdraws??
Great post! But actually for me, the return of student loans is not primarily about financial gains for now. It's more about gaining recognition and dispelling the misconception that SoFi is only about student loan refinancing. That doesn't mean I'm expecting the stock to be $8 by next week, it's just a sign of relief that it's finally over and it may help SoFi to break free from the myth once and for all.
I get that student loans will boost revenue a bit, and is the current narrative driving the stock price increase. However, ***profitability*** is what will drive the stock to new heights. And that is coming soon!
But then, remaining without student loans for longer would distance SoFi from the image of being a student loan company only. The return of student loans is kinda counter that notion, no?
Not really, because it wonât be relevant anymore, so why fighting it? getting rid of stuff that can negatively impact the stock price is always a good thing.
Love the article and the data. Just curious on where you got the loan sale data from? I am assuming there are fees that sofi collects for each loan originated that should add up to income for new and refinanced loans? I expect refinances to be non existent of course for a while. Also, they are low delinquent loans so considered as good diversification especially in a recessionary environment. Even if Sofi makes less profit, it still adds up. Sure, it reduces margins but it should help build more reliability into the whole story and adds up to higher EPS than what it is today?
SoFi reports the sales and the margins in the 10Q reports. I was lazy so I took FY numbers from the 10Ks rather than the quarterly. https://preview.redd.it/pal1616qfp2b1.png?width=1330&format=png&auto=webp&s=d9a7e8bd627415e8eb9b125331c8c0a220f31898 The TAM would be limited. Perhaps an extremely low amount of students with actually higher rate than now that it would be useful for them to refinance to reduce their rate. Noto said last year that there is still a large TAM for refinancing of students who want to reduce their monthly payments (extend the loan) rather than reduce the interest, but the fed hiked like 3 times more after that. SoFi doesn't charge origination fee but they do earn some servicing fee I believe, they don't fully earn it because their servicer is Mohela. More loans add to profitability, regardless if the profit is 6% or 3%, but 6% (personal loans) would be better because they push to profitability faster.
Yes I expect low volume on refinances. However, tons of students will take new loans this year (perhaps about to start for the new school year). There was no incentive for them to take a lower rate sofi loan when federal govt is telling them that they don't have to pay loans and they might also waive portions of their loan amounts if they have federal govt loans.
So, we are not gonna be so fuk rich?
How are you going to be so fuk rich if you never look back after break even? đ¤
I won't. I just want out.
We are definitely going to be so fuk rich, just not because of student loans.
Thank you for this. Too many people havenât realized this. Thatâs why even though the pause hurt it hasnât hurt as much as people think. I almost think it was good as it increased the awareness that SOFI is not just a student loan company.
I don't entirely agree because of the amount of profit SoFi could have made during 2020 and 2021 from student loans. But yeah, perhaps it gave it some distance from being "student loan refinancing company".
Yes the profit loss hurts. Iâm not saying it doesnât. But the loan pause wasnât all negative.