JPMorgan Chase is terminating its student loan program. The bank will notify colleges Friday that come October 12 it is no longer accepting applications for student loans. In a memo to colleges, the bank noted it would continue to work with with students, co-signors, and schools to process loan applications received before that date. It will try to schedule all final disbursements by March 15.
In spring 2012, JPMorgan Chase announced it would only accept student loan applications from existing Chase customers. Now the bank believes student loans offer no major "growth potential," due to increased competition from the federal government. Government-backed loans are generally cheaper and offer more protections.
"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," a JPMorgan Chase spokeswoman told the AP.
Students used to receive federal aid through banks, but in 2010, the government started lending to students directly, mostly eliminating banks from the process. JPMorgan Chase scaled back its disbursements following the change, from $6.9 billion in 2008 to $200 million in 2012.
The bank's total student loan portfolio holds $11 billion, and the bank would not comment on whether it would keep or sell the loan portfolio.
According to the AP, other major lenders continue to offer student loans, including Discover Financial Services, where private student loans grew five percent from a year earlier in the April-June quarter. Sallie Mae has also seen in rise in demand for student loans as higher education costs continue to increase.
Big banks have been selling business units that no longer make sense under new regulations, and student loans would seem to fall into that category — student loan debt has topped $1 trillion. Two-thirds of students graduate with debt and are often unable to pay it for a significant period of time. Over 60 percent of the $1 trillion is held by those over 30 years old, and 15 percent is held by those over 50.