JPMorgan Chase & Co. ceases private student loans
Published: Monday, September 16, 2013
Updated: Monday, September 16, 2013 22:09
Three years after Congress enacted legislation expanding federal funding for student loans, one of the United States’ largest money lenders is ceasing its private college loan program. JPMorgan Chase & Co announced that as of Oct. 12, it will stop accepting applications for private student loans.
JPMorgan Chase & Co’s student loan sector has seen a decline in profit over the last five years. In 2008, profits from the loans topped $6.9 billion, but in 2012 that amount fell to $200 million. Nathan Franklin, services manager in the Office of Student Financial Services, stated in an email message that the JPMorgan Chase & Co announcement will have no direct effect on the university.
“Of the 17,484 undergraduates enrolled last year, 1,711 (9.8%) borrowed from a private source, while 9,179 (52.5%) received a student loan from a federal source,” Franklin said. “Of those who borrowed from a private source, 1,512 borrowed from both a private and a federal source.”
In 2012, the amount of financial aid disbursed by the university was $200 million, with $87.6 million being in the form of loans, both private and federal, Franklin said. The university does not promote any lender to students but does have suggestions for matching students with lenders on their website, Franklin said.
James Butkiewicz, the chairman of the economics department at the university, said he thinks the current trend of rising tuition costs outpacing inflation will begin to cease. Over the last few years, colleges have started to reach a plateau where they realize they simply cannot keep raising rates by the percentages they have for decades, Butkiewicz said. However, he said he thinks students are partially responsible for the tuition hikes as well.
“Students have come to expect more and more from a university,” Butkiewicz said. “Where a university used to be solely focused on education, today students want nicer dorm rooms, better fitness facilities, technologically-advanced classrooms and more. These things all cost money, and that cost is reflected in the rise in tuition.”
U.S. Congressman John Carney (D-Del.) has been involved in the student loan debate. Carney’s communications director Sheila Grant stated in an email message the Congressman is very concerned about the JPMorgan Chase & Co decision.
“This development underscores the challenges students and their parents face when tasked with paying rapidly increasing college tuition rates,” Grant said. “Higher education is key to our country’s economic competitiveness and to the success of our young people, but the cost of college is higher than ever.”
Butkiewicz said despite speculation about other mitigating factors, JP Morgan’s decision was economically motivated.
“JP Morgan’s decision to get out of the college loan business does not mean they suddenly do not want to offer student loans,” Butkiewicz said. “It means that they have found more lucrative field to move into. At the end of the day, it was a business decision through and through.”