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Jp Morgan To Stop Making Student Loans In October...

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It's flagged up on the front page but worth re-posting here.

http://www.cnbc.com/id/101012270

The student loan bubble is starting to burstPublished: Thursday, 5 Sep 2013 | 2:06 PM ET

By: John Carney | Senior Editor, CNBC.com

The largest bank in the United States will stop making student loans in a few weeks.

JPMorgan Chase has sent a memorandum to colleges notifying them that the bank will stop making new student loans in October, according to Reuters.

The official reason is quite bland.

"We just don't see this as a market that we can significantly grow," Thasunda Duckett tells Reuters. Duckett is the chief executive for auto and student loans at Chase, which means she's basically delivering the news that a large part of her business is getting closed down.

The move is eerily reminiscent of the subprime shutdown that happened in 2007. Each time a bank shuttered its subprime unit, the news was presented in much the same way that JPMorgan is spinning the end of its student lending.

"It's no longer sustainable and not the right place to allocate capital in the future," HSBC Holdings Group Chief Executive Michael Geoghegan said in a statement the day HSBC shut down its subprime unit in 2007.

"Lehman Brothers announced today that market conditions have necessitated a substantial reduction in its resources and capacity in the subprime space," the press release issued in August 2007 said.

There is over $1 trillion in outstanding student loans, making it the second largest source of household debt after mortgages. Just 10 years ago, student loans stood at $240 billion. About $150 billion of the total is comprised of private student loans made by banks and other financial institutions, according to a report issued by the Consumer Finance Protection Bureau last year.

The CFPB reported that around $8 billion of private student loans were in default. That number is likely to go higher if interest rates rise because most private student loans, unlike federal loans, are variable rate loans linked to Libor or the prime rate.

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