JPMorgan Chase announced on Thursday that it will stop issuing student loans. The bank had already scaled back its loans to students with disbursements dropping from $6.9 billion in 2008 to $200 million last year. Competition from government loan programs and increased regulatory scrutiny led the country’s biggest bank to decide to get out of the student loan business, Reuters reports.
“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. The bank said that students are increasingly opting for government-backed loans that have reduced the demand for private loans by 75 percent in the last 5 years. Private bank loans tend to have higher, variable interest rates compared to government loans, which also provide more protection for the borrower by allowing students to put off repaying loans in cases of unemployment or economic hardship.
According to the AP: “Other major lenders continue to offer education loans, including Discover Financial Services, which saw its private student loans grow 5 percent 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 Chase said it will stop accepting student loan applications in October and will try to schedule all final disbursements by March 15.