The online personal finance company called sofi He first made a name for himself by raising money from Stanford alumni to help MBA students at the university get cheaper student loans. Later, he had mixers for individual borrowers with luxury titles. Social finance, you understand?

But last month, the now-public company, with more than $1 billion in proceeds from private student loans and other deals, did something shocking: sued the Department of Education to finish the agency break on federal student loan payments and force tens of millions of debtors who aren’t SoFi customers—teachers, soldiers, sick people who had to drop out of school—to pay off their debts faster.

Why would a brilliant, brilliant company, not too far removed from its 2011 start-up days, act in a way that seems so downright bad?

The answer lies in the highly imperfect way that we help most people, not just MBAs-to-be, pay for higher education in America. But it’s also an object lesson in the red-blooded capitalist behavior we should expect from any profit-seeking entity, no matter what it looks like.

SoFi exists because of a quirk in the federal student loan program. Although the government charges different interest rates depending on the type of loan, within those loan types there is no differentiation. All graduate students pay the same, regardless of the subject they are studying, the school they attend, or what they earn later.

That fact creates an opportunity for companies, like SoFi, that want to target students at the highest-earning schools with the best payment histories. So make no mistake: SoFi is a competitor to the US government, and it attracts borrowers with high balances and the income to make debt affordable.

In its early years, SoFi presented itself to the world as an anti-bank. This was effective and charming. It was also hilarious, as one of its founders, mike cagneyis a scandal-plagued former derivatives banker at Wells Fargo who ran a hedge fund as a side hustle.

Soon enough, as CEO, Mr. Cagney embarrassed the company (romantic relationships with subordinates, leaving evidence of his misdeeds on private jet manifests) and introduced himself. His eventual replacement, Anthony Noto, a former managing director at Goldman Sachs, then acquired a bank for SoFi, which had previously run commercials with the tagline “not bank. sofi.”

Kill Mr. Cagney’s”kill banksIt was worth campaigning for at least two reasons. First, when you are a bank you can use depositors’ money to make loans. That can be more profitable than using capital from other sources.

Also, product diversification makes sense for a company like SoFi that wants to grow. If you do right by young soon-to-be-rich borrowers, they may stick around for life if you have a desirable suite of financial services.

Today, SoFi bank can connect you with a checking account, and the company offers all kinds of trendy knick-knacks, like crypto and options trading. He put his name on the football stadium where the Los Angeles Rams and Chargers play. And it was made public through one of those SPACs that you read a lot about a few years ago.

But then SoFi ran into a pandemic — and political — problem that even the best game theory professor at Stanford couldn’t have anticipated.

Not long after the world went into lockdown in 2020, legislation made it possible for federal student loan borrowers to stop making payments without any financial penalty.

The pause had an expiration date, but the Biden administration extended it several times and it remains in effect. That has created a huge problem for SoFi. After all, if borrowers don’t have to make any interest payments on their federal loans, why would they refinance with SoFi at a lower rate on a loan that they would have to start paying right away?

They probably wouldn’t, and they haven’t. The dollar value of new SoFi student loan originations fell 54 percent between 2020 and 2022.

This was not a total disaster. SoFi also offers personal loans, for example, to pay off credit card debt with a single loan at a lower rate, and those originations now dwarf those for student loans. However, investors are not impressed. SoFi shares closed Friday about 76 percent below the all-time high they hit in 2021.

So he sued, all by himself. And the response from his competitor was totally predictable and pretty aggressive for a government agency. “This lawsuit is an attempt by a multi-billion dollar company to make money while forcing 45 million borrowers to pay again, putting many at serious risk of financial damage,” the statement the Department of Education provided to reporters said.

Borrower advocates found SoFi’s move galling. “We have companies in the private sector that have taken advantage of the broken edges of America’s student loan and education system,” said Cody Hounanian, executive director of the Student Debt Crisis Center. “I see the SoFi suit as another symptom of speculation.”

That is hot politics. Also consider the legal issue. “When the government does something good for the citizens and you can’t make money, that shouldn’t be the basis for filing a lawsuit,” said Persis Yu, deputy executive director and administrative adviser at the Student Borrower Protection Center. “Corporations have no right to be profitable.”

However, companies have a duty to shareholders. And if you think investors come first, demand for SoFi starts to make sense.

SoFi declined to comment, citing a need to remain quiet ahead of its May 1 quarterly earnings report. But last month, he was quick to explain that he was in favor of President Biden’s efforts to pay off up to $20,000 in student loan debt. He, too, backed the initial 2020 pause. The company would also be fine with an immediate payment restart only for those whose incomes are too high to qualify for Biden’s cancellation plan.

Here’s what he didn’t say, but what outside observers are assuming: The company doesn’t believe for a second that the Biden administration will lift the pay pause this summer, as has said that it intends to do. Why, just as the presidential election is heating up?

Suing could force the government to start the payment machinery again, which might not be a terrible thing. Given the low unemployment rate and the existence of income-based payment plans for people who are struggling, few people would go broke if the February 2020 status quo were restored. And that status quo would set the bomb for more. SoFi loan applications.

It could work that way. But Natalia Abrams, president and founder of the Student Debt Crisis Center, had another question: Why would SoFi alienate potential customers by filing this lawsuit?

There are a couple of possible answers. One is the likelihood that the majority, perhaps the vast majority, of federal student loan borrowers do not have credit scores similar to the average of 773 maintained by current SoFi student loan borrowers. In other words, none of the people in that majority are “big” enough to qualify, as the company put it in a bizarre commercial it aired during the 2016 Super Bowl.

Meanwhile, even great people may not wonder how their potential lender treats people who aren’t their customers. If you were looking for a student loan or wanted to refinance one, you’d probably search for “best student loan interest rates” and not “SoFi reviews.” And if you searched for reviews on Google, would the news of the company’s lawsuit appear near the top of the results?

At the moment, it doesn’t. SoFi is counting on this, and on the fact that many people don’t think the student loan repayment lull should have lasted that long.

SoFi is probably right about its potential customers. So why did you sue the federal government? Because there were quite a few advantages and very few disadvantages. And because the banks, let’s repeat the word for emphasis, bank – they go to the bank, no matter what.