Okay folks, so in the wake of the Biden Student Loan Forgiveness decision and the announcement of when the moratorium ends, I want to discuss So fine, how will the student loan decision affect them and is Sofi a buy at these prices Should you get in before the loan moratorium ends time Stamps below will be discussing all of these things. But first, a word from our sponsor Moomoo and they're up to 13. Free Stock promotion That gives you three more stocks than the regular 10 free stock promotion if you sign up and deposit and meet certain requirements using our link down below. This market is ruthless and so you better be prepared with the best tools behind you.

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Thank you Moomoo for sponsoring this video. Now back to the content. Okay, so let's go in and talk student loans here. So you pull up Selfies latest filing: They own 3.2 billion dollars in student loan debt payable to them.

Securitized student loans are at 466 million. Obviously, these units are in thousands, but if you look at their overall loans owned, they own 7.9 billion total. Which means that more than 45 almost half of their entire owned loans payable to them are specifically student loan based. And really, before the Pandemic Sofa was essentially a student loan company.

And then all of a sudden the pandemic hit, and the government pretty much completely froze their industry and you could see the direct dump in new student loan originations after the student loan moratorium went into place. Just looking at this, you can imagine that when the moratorium ends, you'll at least start seeing some momentum to where it was pre-moratorium right? It might not get back there right away because of the things I'm going to mention later on in this video, but you can definitely imagine that if you've completely closed off this market to a huge degree. Well, all of a sudden, if you start opening it again, this should start taking back upward pretty pretty fast. Now, of course, it's very, very important to understand that Selfie is a private lender, right? so it's not public.

Which means that the Federal Freezes and Moratorium and so on and so forth doesn't apply to what Sofi has. If you currently have a loan at Sulfide, that loan won't be affected by the forgiveness. If you had a loan throughout the pandemic, Well, that loan was not frozen, you still had to pay towards it. But the Sofi business model works on new refinancing and bringing new loans into their overall ecosystem.

And what motivation has there been for borrowers to refinance if their loans have been frozen quarter after quarter after quarter. If they think that there's a dangling fruit of forgiveness on the horizon, nobody's going to refinance, especially to a private company if they think that. all of a sudden there's a massive forgiveness plan coming. So in order to understand how this forgiveness plan is going to affect the five, If so, you have to go over and look at what the plan is.

You get twenty thousand dollars in forgiveness if you went to college on pell grants. Ten thousand if you didn't receive the Pell grants. Based on my research, it seems like around a third of students get pell grants, and then the other criteria is that you can only get forgiveness if you were earning less than 125 000. And this extends the overall student loan pause on payments until December 31st, 2022.

And then you have this new line here where for undergrad loans, they cap repayment at five percent of an individual's monthly income. If you make four thousand a month, five percent of that is like, what 200 bucks a month? So that means that you're capped at 200 bucks a month versus before you could be paying 600, 700, 800, right? Which would obviously be a big big problem. Now there's good and bad for this. with so far right, and you could probably already see what the bat is.

Well, the bad. It's pretty obvious if government forgives a ton of loans in the amounts ranging from 10 to 20 000, Well, selfish. Total addressable Market is much lower. There's a lot less loan funds out there that Sofi can help refinance.

The bulk of Sofi's loans pre-pandemic originated from people that had federal student loans, so certainly if you knock out a chunk of that debt, well, the addressable market goes inward. But take a moment to listen to what the chief executive octopus over at Sofi said during an earnings call in May quote: If there is some level of forgiveness 10 000 and below, I think it would be great for our business. Blah blah blah. There is a cohort of people that have been waiting and waiting for student loan forgiveness and they have not refinanced.

You have all these people like I said earlier, who are waiting and have not refinanced, right? And that's in our demographic as well. Once there actually is forgiveness, there is nothing to wait for anymore. So here they're saying, wait a second, there's a carrot at the end of the stick. Sure, there's some forgiveness.

Sure, the pause is continuing on to the end of the year. But now we finally have a carrot at the end of the stick and all of these people that were waiting for forgiveness are now going to say, okay, well we know what's going to be forgiven. It's been forgiven. Now it's time to refinance the rest.

All of a sudden, you got the market opening up again and this is from the Chief Executive Octopus. According to Education Data.org the average federal student loan debt balance is 37 667, while the total average balance including private loan debt may be as high as 40 272.. So if you are the average borrower who just had 10 000 forgiven from your total balance at 40 274, you still have like thirty thousand dollars left that you owe, right? If you had a pell grant, maybe you have twenty thousand left that you will. So it's like, sure, yes, some of that debt is forgiven.

But so fine Now is gonna have access to all of these clients that still have debt left to refinance the last two years. So if I had access to none of these people because they were all waiting now, they're not going to be waiting anymore Going back to The Octopus, He said prior to the pandemic, our student loan refinancing business had an average loan size of about seventy thousand. So again, if their average customer is consolidating and refinancing seventy thousand dollars worth of student debt with Sofi, even if they have the ten to twenty thousand dollars for given, that's still a huge market left to address, which again, has essentially been frozen the last two years. So in total, I would say yes.

this decision is bad for Sofi in the sense that it weakens the overall market size. For Sofi's refinancing product, a chunk of the market will be obliterated by this forgiveness and federal loan rules. For example, a cap on repayment at five percent of monthly income will drive away some of the people because the private loan market isn't going to have that kind of cap right. But at the end of the day so far, should still see a substantial boost in demand from the majority of the market of refinancing potentials who are left and so natan in effect after this forgiveness goes through, there's still going to be a massive market for sulphide, one that it hasn't been able to attack for the last two years.

Not to mention that this executive order quite frankly does nothing to address the core problem right. Each year there will be a new group of suckers. I mean students who will be going and borrowing more and more money. According to Finned.org on average, tuition tends to increase about eight percent per year.

An eight percent college inflation rate means that the cost of college doubles doubles every nine years. Which means what student loan debt is going to continuously balloon and there's going to be a bigger and bigger market. But so far, the way that I look at it is that before Covet so far was mostly a one pillar business, and that pillar was what student loans. But now in 2022, there's many different pillars.

Student loans are still a key pillar that have been dragging down the top and bottom line for the last two years, but the other pillars have taken more weight. You now have a massive personal loan segment which you didn't have before, you have a loan, a home loan segment. Outside of that, you also have a growing technology platform segment Galileo, which provides a digital payment platform for other fintech companies. And then you have the financial services segment, which arguably is one of the more exciting metrics for future growth of this company.

You look at the growth of new members. As of Q2, you saw 450 000 new members which is 69 year over year. This is a quarter war. Financial Conditions Titan keep that in mind most financial services company and especially Fintech as a whole.

Overall, I should say did badly. In terms of products. Q2 was the second highest quarter for new product in terms of their Galileo platform. They've reached 117 million accounts.

117 million folks. That's a lot and the pace of lending product expansion is accelerating and likely will continue to accelerate when the student loan market really reopens. So with so far, basically I see a rapidly growing company at least business-wise certainly not stock price wise, with a major pillar of its business about to reopen. I also see a share price that's been beat down like crazy, mostly because of financial conditions this year, but also because hey again, it's a student loan company that has turned into a Fintech Bigger loan, personal loan, credit card, savings account, Galileo Api payment processor company with a bunch of other different things thrown in between.

But still, one of the core pillars is missing. so people are like, hey, don't want to touch it We don't know what Biden's going to do now we know what Biden's going to do. I think that sofa deserves at least a little bit of a relief rally on that. but I also believe that over the long run, this point is going to age to be an incredible, incredible price.

That said, like I was saying also a couple days ago, I also believe there's going to be another Fed rug pull ahead of us as inflation continues to be a problem for at least a couple more quarters. In that case, you can certainly see downside back to the fours on so far, maybe even lower, but I think probably somewhere around the fours is where you bought them. so Fi isn't going to be a popular stock again for at least at least another quarter or two. But I think that probably after Q1 of 2023 after you get that report and you see Sofi in full action again.

after all of that new demand from refinancing that has been held up and pent up the last two years comes and benefits them. I think that when markets look at that quarterly report, they're going to be like Sulfi. Looks like a great deal. Hey, at the end of the day, I get it.

You can make an argument for why you shouldn't buy any stock, but sometimes when it comes down to long-term fundamental plays, it makes sense to just have a radar of different stocks that you are looking to buy so that when you get the best deals possible, you can take advantage. What you don't want to be is in a situation where all of a sudden things have dumped another 20 and you don't know what to buy because you haven't done the work on any of them. So anyways, hopefully this video was useful for you. Let us know what you think down below.

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