LOS ANGELES, Calif. – JPMorgan Chase & Co. is exiting the student loan business as more families opt for government-backed loans, which are generally cheaper and have more protections.
The New York bank had already been scaling back its role in student lending. In the spring of 2012, it stopped making student loans to borrowers who weren’t already Chase customers. Chase made just $200 million in student loans last year, down from $6.9 billion in 2008.
The lender said Thursday that it won’t accept student loan applications after Oct. 12. In a memo to colleges, Chase noted it would continue to work with students, co-signers and schools to process loan applications received before that date. It also asked administrators to schedule all final loan disbursements before March 15.
“We just no longer see meaningful growth in this market and have decided to invest our resources in our other business, like auto lending, where we do see some real future potential,” said Trish Wexler, a JPMorgan Chase & Co. spokeswoman, in an interview.
The bank had 12,500 customers with Chase student loans last year, a fraction of the 56 million people that it counts as consumers.
“So this really has become a very small part of our portfolio,” Wexler said.
Wexler noted that many students have been increasingly relying on government-backed education loans, a trend that’s reduced the private market for student loans by 75 per cent in the last five years. Private student loans issued by banks tend to have higher, variable interest rates than the loans issued by the U.S. Department of Education. They also do not come with the same guaranteed protections, such as deferment for unemployment or economic hardship.
Other major lenders continue to offer education loans, including Discover Financial Services, which saw its private student loans grow 5 per cent from a year earlier in the April-June quarter. Sallie Mae, formally named SLM Corp., has seen an increase in demand for student loans as higher education costs continue to rise.
JPMorgan shares ended regular trading up 24 cents at $52.11.