• The Biden administration is considering extending the pandemic pause for federally-backed student loans beyond May 1
• SoFi Technologies (NASDAQ:SOFI) CEO Anthony Noto believes it will do more harm than good
• Investors shouldn’t worry about what this means for SOFI stock

In early March, White House Chief of Staff Ron Klain stated that President Biden might extend the freeze on federal student loan payments beyond the May 1 deadline. While that might seem like bad news for SOFI stock, it really won’t have much of an effect on the company’s overall business.

“‘SoFi is in the business of student loans,’ Noto stressed in an interview with Yahoo Finance. ‘So we get impacted by this indecision. But that’s not the motivation. SoFi is going to be fine either way. … We achieved over a billion dollars of revenue in all of 2021 in our first full year of profitability on an EBITDA basis, all while the federal student loan program has been on hold.’”

That doesn’t mean SoFi CEO Anthony Noto shouldn’t be annoyed with the president for his indecision on the issue. 

Since March 2020, according to Noto’s March 17 blog post, the suspensions have cost taxpayers $150 billion. He makes some excellent points about what should happen on this front.

Either way, SoFi’s business is doing just fine. Here’s why.

SOFI Stock and Its Student Loans

As Noto pointed out in his blog post, both the economy and its student loan business are in good shape. 

“As President Biden touted in his State of the Union address, the economy grew at a rate of 5.7% last year; more than 6.6 million jobs were added; unemployment fell at its fastest pace on record; and the number of workers filing for unemployment insurance declined by more than 70 percent,” Noto stated. “At SoFi, 98.9% of our borrowers are making monthly payments on time versus the 15% that were in forbearance in March 2020.”

So, 1.1% of its loans aren’t getting paid on time at the moment, compared to 15% in March 2020. That’s quite an improvement. The company reported Q4 2021 results at the beginning of March. Several points need mentioning when it comes to student debt.  

In the three months ended Dec. 31, 2021, it originated $1.46 billion in student loans, 51% higher than in Q4 2020. For all of fiscal 2021, it originated $4.29 billion in student loans, down 13% over 2020. The company managed to grow originations by 51% in the fourth quarter despite the Biden administration extending the pause until May 2.  

On pg. 8 of its Q4 2021 report, SoFi’s guidance suggests a $32.5 million (midpoint of guidance) hit to revenue in the first quarter of 2022, along with a $22.5 million drop in contribution profit.  

Yes, it’s a headwind, but it’s not going to make a difference in the long run.

The Rest of Its Business

Pg. 77 of the company’s 2021 10-K gives you a good idea of how much SoFi’s business has grown over the past three years. It has three reportable segments: Lending, Technology Platform, and Financial Services. The segments have three-year revenue growth of 72.4%, 24,414%, and 1,389.7%, respectively. Its technology platform barely existed three years ago, while financial services contributed just $3.9 million in net revenue.

In terms of profitability, it’s gone from an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss of $149.2 million in 2019 to a profit of $30.2 million in 2021. That’s a three-year improvement of 120.2%. It has had six consecutive quarters of positive adjusted EBITDA.

Its total members over the past three years have grown by 254.4% to 3.46 million in 2021 from less than a million in 2019.  

Over the past three years, its noninterest income increased by 549.9% to $732.6 million (74.4% of total net revenue) from $112.8 million (25.5%) in 2019. All three segments experienced a big three-year increase in noninterest income.

Like Costco (NASDAQ:COST), the more members SoFi has, the better. Now that it has SoFi Bank, its net interest income will start to rise, becoming a more significant part of its business.

Currently generating revenue from six silos: SoFi Invest, SoFi Money, personal loans, home loans, student loans, and credit cards, I can see it adding more revenue streams in the future through its bank charter.

The Bottom Line

SoFi made a name for itself through student loans. However, Anthony Noto focuses on the 3.46 million members and what it can do to make their financial lives more secure. 

It launched SoFi Relay in 2019 to help its members to do a better job keeping track of their overall financial picture. It’s free to use. 

The longer a member stays with SoFi, the more products and services they’ll use. Unlike the banks, they understand that all of the silos work together. One isn’t more important than another. For example, student loans might have gotten the company to the dance but to stay in the game it’s had to branch out. 

In the scheme of things, the Biden administration’s extension of the pandemic pause in student loan payments won’t hurt the company nearly as much as it would have two or three years ago. 

The diversification plan Noto put into place is working. The pandemic pause in student loan payments is proof positive.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.