JPMorgan Chase will cease making student loans next month, according to a memo obtained Thursday by The Washington Post, a move that will leave the already shrinking private loan market in the hands of even fewer firms.
The decision follows a period of turmoil in education finance sparked by the overhaul of the federal student loan program in 2010. The government captured a majority of the market by choosing to lend directly to students, leaving a limited role for private lenders.
Since then, JPMorgan’s once- thriving student lending business has declined from $6.9 billion worth of loans made in 2008 to $200 million originated last year, according to the company. JPMorgan began to retreat from the business in July 2012 when it stopped extending student loans to customers without an existing relationship with the bank.
“We no longer see any meaningful growth in the private student lending market,” said Trish Wexler, a representative for JPMorgan. “We’ve just decided to invest our resources in our other businesses like auto lending, where we do see a lot of potential.”
In the memo, which JPMorgan sent Thursday to 2,000 colleges, the company said it would stop accepting new loan applications after Oct. 12. Schools must schedule all final loan disbursements before March 15.
“This is a troubling trend for students and taxpayers, meaning even less competition in the marketplace,” said Richard Hunt, chief executive of the Consumer Bankers Association, a trade group.
As it stands, Sallie Mae, Wells Fargo and Discover Financial Services dominate the market for private student loans, according to data from the Consumer Financial Protection Bureau.
This year, Sallie Mae split into two publicly traded companies — one servicing government-backed loans and the other making private loans — to strengthen its business. The company, like other education lenders, suffered when Congress eliminated a $60 billion program to support private student loans with federal subsidies three years ago.