JPMorgan Restricts New Student Lending to Bank Customers

(Corrects JPMorgan’s 2011 student lending in the fourth paragraph of a story originally published April 10.)

JPMorgan Chase & Co. (JPM), the largest U.S. bank, will stop providing private student loans to people who aren’t customers of the company beginning July 1.

“The private student-loan market has continued to decline and government programs have expanded to help more students and their families,” Steve O’Halloran, a spokesman for the New York-based bank, said today in an e-mail.

Customers must have a Chase deposit, loan or credit-card relationship to apply, he said. The company will continue to service existing education loans and work with financial aid offices at schools to certify loans for students, he said. The American Banker reported the bank’s decision on March 30.

JPMorgan has been paring back student loans, which comprise a small part of the estimated $1 trillion market and the company’s $2.27 trillion balance sheet. The student-lending portfolio shrank 15 percent since 2009 to $13.4 billion as of Dec. 31 as bad debts almost doubled. Uncollectible loans climbed 72 percent since 2009 to $434 million last year, according to the bank. JPMorgan made $300 million of student loans last year, down from $1.9 billion in 2010 and $4.2 billion the prior year.

As of July 2010, private lenders like JPMorgan could no longer originate government-backed education loans. Student loans are now the largest source of unsecured consumer debt in the nation, according to the Consumer Financial Protection Bureau, and rising delinquency rates have spurred speculation about a possible bubble.

The agency is studying the private-loan market and last month began accepting complaints about providers. Sallie Mae is the largest private student lender with a portfolio of about $36 billion, according to the Newark, Delaware-based company.

To contact the reporter on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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