Tomahawk, WI 9/19/2013 (BasicsMedia) – JPMorgan Chase & Co (NYSE:JPM) is the largest bank in the U.S by miles. It has been offering a number of products and services which are designed to help its clients. Its banking solutions are among the most-sought after in the U.S. One of the products it has offered for quite some time now is the student loan. Lately, the company has indicated that it intends to stop this program, which it says has only helped it to make “marginal money”. In this article, we take a look at the reasons which have convinced JPM that student loans are just not worth it.

 JPM Says Student Loan Revenue is Declining

 The money JPM makes from student loans has been on a decline in the last 3-4 years. A look at what the bank got from this product in 2008 will reveal that the situation has drastically changed for the worst. Whereas the bank raised $6.9 billion as revenue in 2008 purely from student loans, the figure has dropped to $200 million in 2013. This is not the kind of amount the bank of JPM’s statue would feel comfortable with. The bank has already sent memos to some 200 colleges and universities it served with this product informing them of its intention to bring it to an end.

 Student loan programs fall under the private lending industry. This is an industry which always brought great rewards to companies such as JPM. However, the returns which banks get from lending to this industry have dropped drastically. In 2007, student lending raised a total of $23 billion. The amount fell to only $6 billion in 2012. Such trends points to a situation where more banks will follow JPM’s lead and get out of the student loan business. As matter of fact, Bank of America exited in 2009, Citigroup followed in 2010, and US Bankcorp did the same in 2012.

JPM Bowing to Washington Pressure?

 The other reason why banks of JPM’s caliber are exiting the student loan business is as a result of intense pressure from Washington. Banks have been under a lot of pressure from the Wall Street to try something very different from student loans which have a greater risk than other products. The student loan debt which is yet to be settled stands at around $1.2 trillion as at 2013, at least according to the Consumer Financial Protection Bureau. The fact that interest rates keep spiking, and the college tuition gets more expensive, has also led to the decision by JPM.

 JPM Not Convinced by Skyrocketing Cost of Education

 Since the 1980s, the cost of education has skyrocketed by almost 1,100%. This is four times the rate of inflation within the same period. However, other lenders such as Wells Fargo, Sallie Mae, and Discover have decided to continue lending student loans. The three firms are currently ranked as the top lenders in this industry. There is a lot of concern to the effect that the student loans may just be the next bubble. If this concern is not addressed, then JPM’s decision to exit this field will be seen as a wise move which will not cause shareholders to experience losses.

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