JPMorgan Chase (JPM) is getting out of the student loan business.

The $2 trillion-asset company will stop accepting new student loan applications on Oct. 12, the company said Thursday. Stiff competition from federal lending programs led the bank to conclude that private student loans held limited future potential.

"Students and their families are increasingly relying on government-backed loans rather than private student loans, and as a result the market has declined by 75% in the last five years," JPMorgan Chase spokeswoman Trish Wexler told American Banker. "We no longer see growth potential in this market. We're planning to focus our resources in other businesses where we do see room for growth, like auto lending."

New of the bank's decision to exit student lending was first reported by Reuters.

JPMorgan Chase has been scaling back on private education lending since mid-2012, when it began offering student loans only to existing customers. It held $11 billion in student loans as of June 30, according to Reuters — less than 0.5% of its total assets.

Competition from the federal government has prompted other big lenders to exit the private student loan market. U.S. Bancorp (USB) pulled out of the student loan market last year.

The Consumer Bankers Association issued a statement Thursday shortly after JPMorgan Chase's decision was reported. Without naming the bank by name, CBA President and Chief Executive Richard Hunt said, "This is a troubling trend for students and taxpayers, meaning even less competition in the marketplace. Unfortunately, since the near government takeover of most — about 93% — of the student loan program in 2010, federal student debt has exploded to the tune of over $1 trillion."

Particularly troubling, Hunt said, is a rise in defaults. "This is especially concerning since federal loans, unlike education loans made by banks, do not involve an ability to repay assessment. The [Consumer Financial Protection Bureau] and the Department of Education should make college affordability and the federal student debt crisis a top priority."

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