JPMorgan Chase said last week it plans to leave the student loan business since more students are favoring government-backed loans, which usually carry lower interest rates and have more protections.
Chase made $200 million in student loans last year, compared to $6.9 billion in 2008. The bank said it will not accept student loan applications after Oct. 12, but will continue to work with students, co-signers and schools to process applications received before that date, USA Today reports.
Trish Wexler, a spokesman for Chase, said students’ increased reliance on government-backed education loans has reduced the private market for student loans by 75 percent in the past five years.
“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,” Wexler said, according to USA Today.
Consumers Bankers Association President and CEO Richard Hunt said the trend is “troubling” for both students and taxpayers because of reduced competition in the marketplace.
“Unfortunately, since the near government takeover of most—about 93 percent– of the student loan program in 2010, federal student debt has exploded to the tune of over $1 trillion,” Hunt said. “There is no end in sight to this debt accumulation and its climbing default rate. This is especially concerning since federal loans, unlike education loans made by banks, do not involve an ability to repay assessment. The CFPB and the Department of Education should make college affordability and the federal student debt crisis a top priority.”