JPMorgan Chase & Co (NYSE:JPM) will stop making student loans, according to documents picked up by Reuters. According to these documents reviewed by the news agency, JPMorgan decided that Federal student loan offerings were too competitive and reduced its ability to grow the business. The bank will stop accepting applications for loans on October 12.
The end to student loans at JPMorgan Chase & Co (NYSE:JPM) has been coming for some time. Last year the company announced that it would no longer offer loans to students who were not pre-existing customers. The company holds about $11 billion in student loans in its portfolio, according to the Reuters report.
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Student loan slump
According to the report, loans for student education have fallen into a slump since the 2008 global financial crisis. Lending for the 2007-2008 school term was at historically high levels, totaling $23 billion. In the last term available for study, 2001-2012, the total amount of loans for education had fallen to $6 billion.
The fall in private lending for education has been falling for a number of reasons, including a general unwillingness to lend on the back of the financial crisis, and a federal program brought in to reduce the cost of higher education. That program, the William D. Ford Federal Direct Loan Program, was brought in under the Health Care and Education Reconciliation Act of 2010.
The Federal Direct Lending Program has existed in one form or another since 1992, and was expanded under President Clinton, eventually reaching its current form in 2010. The program allows students to take advantage of low interest rates that are close to impossible for private institutions to match.
The shutting down of the JPMorgan Chase & Co (NYSE:JPM) student loan program has been on the way since at least last year, but the timing of the change fits among several other changes at the bank. After the London Whale scandal last year, the investment house has been increasingly under the eye of regulators, and is in the cross-hairs in many different inquiries and investigations.
In recent months the bank has been accused if rigging electricity costs, and violating laws designed to prevent bribery of foreign officials. The bank is also in the midst of disputes relating to the 2008 financial crisis. The drop of the company’s student loans business is unrelated to these problems no doubt, but the company is undergoing multiple changes at the moment.