By Jennifer Liberto
WASHINGTON (CNNMoney) — JP Morgan is getting out of the student loan business.
Starting Oct. 12, JP Morgan Chase will no longer accept new applications for private student loans, said Trish Wexler, a spokeswoman for the New York bank.
The decision will not affect existing student loans nor loan applications submitted until Oct. 12.
JP Morgan made the decision based on lending trends, with more students and families turning directly to government loans over the past five years, Wexler said.
Private student lending market has declined by 75%, she said.
“We no longer see meaningful growth in this market,” Wexler said.
JPMorgan Chase moved in this direction in 2012, when it limited student loans only to existing bank customers. In 2012, its student loan portfolio was $11.6 billion, according to the bank. Since Sept. 1, 2012, the bank has made 12,500 student loans.
Ever since the financial crisis, more students have been getting their student loans directly from the federal government. In 2010, Congress passed a law cutting out middlemen banks that collected a fee for making student loans backed by the federal government.
Yet, some students still turn to banks to help finance their higher education, which has grown costlier over the years. In 2012, of the $113.4 billion in student loans made during the 2011‑12 school year, about 7% were made by private-sector banks, according to the College Board.
Student loan debt has skyrocketed in recent years, as have delinquencies, making it a pressing issue for millions of Americans. In 2011, students owed an average of nearly $27,000 in loans, making it second only to mortgages in consumer debt.
The head of the Consumer Bankers Association warned that JPMorgan’s move will limit lending for students.
“This is a troubling trend for students and taxpayers, meaning even less competition in the marketplace,” said Richard Hunt, president of the bankers’ group.
™ & © 2013 Cable News Network, Inc., a Time Warner Company. All rights reserved.