NEW YORK JP Morgan Chase, the second-biggest provider of student loans, said it is exiting the market, leaving a huge opening in the burgeoning market for credit unions.
The banking giant said in an internal memo it is exiting the market because increasing numbers of families are opting for government-backed loans, which generally are cheaper and have more protections.
The move comes as a growing number of credit unions are entering the private student loan market. According to CUNA, credit union student lending is up 35% from 2012 and up 26% in the first six months of 2013.
“While big banks may not see student loans as a profitable enterprise, credit unions are proud to be increasing our assistance to young students, scholars and many other underserved communities.” said Paul Gentile, executive vice president of strategic communications and engagement for CUNA.
JP Morgan, which trails only Sallie Mae as the largest student lender, already had been scaling back its role in student lending. In spring 2012, it stopped making student loans to borrowers who were not already bank customers. Chase made just $200 million in student loans last year, down from $6.9 billion in 2008.
On Thursday the lender said it will not accept student loan applications after Oct. 12. In a memo to colleges, Chase noted it would continue to work with students, co-signers and schools to process loan applications received before that date. It also asked administrators to schedule all final loan disbursements before March 15.
