Private lenders begin exiting student loan market

| April 9 2012
Hannah Thoreson

From American Banker:  

U.S. Bancorp (USB) is pulling out of the private student loans market and JPMorgan Chase (JPM) is sharply reducing its lending, as banking regulators step up their scrutiny of the products.

The federal government stopped providing guarantees on the loans originated by banks and other private student lenders in 2010.  It appears that without this subsidy, banks cannot make student loans a profitable product.

Indeed, without government meddling, student loans are probably a product that would hardly exist at all.  Without the subsidies, it’s clear that banks do not want to give marginally employed people access to virtually unlimited amounts of credit.

The upside of this is that it may be a sign that the student loan bubble may be about to finally pop.  The federal government has turned nearly an entire generation into wage slaves through debt, and the sooner it ends the better for everyone.

The downside is that the U.S. Treasury is likely to become the only major player remaining in the market, thus making taxpayers responsible for even larger amounts of this toxic debt.