Student Loan Consolidation: Big Banks Changing The Way They Lend

It's been recently announced that JP Morgan Chase will no longer fund post-secondary education as of October of this year. While student loan consolidation is on the rise for borrowers who are having trouble making their current loan payments, those who are just starting college still need to find ways to pay for tuition and the many other costs associated with seeking a college degree.

JP Morgan referenced the student loan market as one that isn't growing enough for their particular projections as a financial institution. While student loan debt toppled over the $1 trillion mark, most of which is held by the Federal Government, it's questionable that big banks don't want to be a part of this type of lending because there is a shortage of business. Could it be that institutions like JP Morgan just don't want to be a part of an ailing bubble that on the verge of bursting? Perhaps.

While 10 years ago, student loan debt rang up at $240 billion, it's over four times that amount currently. As it stands, banks and other financial institutions hold $150 billion of the total, reported by the Consumer Finance Protection Bureau last year. The bureau has also reported that $8 billion of those private loans are in default. This is partly due to the fact that most interest rates associated with private loans are variable and therefore subject to dramatic rises. Borrowers are finding themselves unable to keep of with the cost of their private loans. With numbers like these, it's no wonder private lending institutions like JP Morgan are looking to get out of the student loan business. It's just too risky. Aiken this situation to that of the housing bubble that caused the sub-prime shutdown in 2007.

While private lenders like US Bancorp and JP Morgan fold on the proverbial student loan game of cards, banks like Wells Fargo & Co., PNC Financial Services Group, SunTrust Banks Inc., and Discover Financial Services Inc. continue to try their hands at student loan debt. The Federal Government continues to be the largest financier of post-secondary education. While there is no shortage of loan defaults when it comes to federal loans, it's the government; they can stand to keep loaning based on the fact they can continue to take the risk considering how the loans are funded.

In the meantime, the Department of Education has rolled out several programs to offer student loan relief including Teacher Loan Forgiveness and Student Loan Forgiveness. Student loan consolidation is an option for borrowers who hold federally funded loans, not private. Consumers can apply on their own or seek help from one of the several student loan consolidation companies offering professional help in getting through the process.

Student loan consolidation programs are offered by the Department of Education to give borrowers the option of lowering their monthly payments as well as having the possible option of entering into loan forgiveness after making a certain number of payments and working as a public service worker. Consolidation may be the first step for borrowers to get their debt under control and the government to get more of their money back.

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