Student Loan Market Exit

JP Morgan Chase recently announced that effective October 12, 2013, it will no longer make student loans.  Wells Fargo is now the ONLY major US commercial bank still making student loans.  Chase is the latest bank running for the exit doors.  Moody’s reports that during the 2011-2012 academic year, private lenders made about $8.1 billion in student loans out of the approximately $1 trillion student-loan market.

The impact of this move is debatable.   Commercial banks look out for number one, all day, every day.  While their advertising is all about customer service and friendly relationships, we have seen too many of those “relationships” shrivel up and die at a moment’s notice.   Commercial banks now hold approximately 15% of the outstanding student debt, while the federal government holds the remainder.  JP Morgan Chase reports that it derived “only” $200 million in revenue from student lending in 2012, down from more than $6 billion of revenue off the loans in 2008.  One thing is for sure:  the “student loan market” is headed the way of the rest of the country’s economy — either the day of reckoning for hard choices to be made, or just more of the head in the sand mentality displayed to date until it becomes too late for many options.


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