New York City (9/6/13)--JPMorgan Chase said it will stop taking student loan applications after Oct. 12 and exit the student loan business (Fox Business, Reuters), thereby eliminating a significant player in the competition for private student loans.
"As banks exit student loans, more and more credit unions are getting involved in student loans," noted Paul Gentile, of the Credit Union National Association, after the global firm's announcement.
CUNA figures show that credit unions have $2.2 billion in private student loans.
"There has been fantastic growth in the area recently," Gentile said, "For the first six months of 2013, credit union private student lending is up 26%. And some 617 credit unions offer their members private student loans."
Gentile underscored that credit unions offer low-cost private student loans and have a long track record of low default rates compared to other providers.
"Credit unions work to ensure their members fully understand the commitment of a student loan and many credit union programs require students to pay a small good faith payment while students are in school, rather than deferring all payments until graduation. This builds financial awareness and ensures that student understands their obligation." Gentile is CUNA executive vice president of strategic communications and engagement.
Reuters reported that JPMorgan Chase student loan portfolio equaled $11 billion at the end of June this year, and said that was less than 0.5% of JPMorgan's $2.44 trillion of assets.
Last year, the bank limited its education loan program by making such loans available only to existing Chase customers.
Reuters quoted one of the bank's executives as saying that by dropping its student lending operation, the bank can redeploy those resources and also focus on its top priority, identified as strengthening the regulatory control environment.
Federal regulators early this year ordered JPMorgan to bolster its risk controls and beef up anti-money laundering standards.