Since JPMorgan Chase announced that it will stop servicing student loans come October, other private lenders are working at extending their services to fill any potential gap. Student loan debt is a profit builder for both the federal government and public sector alike. With the high cost of college tuition and the need for a degree in such high demand, many private companies will continue to service the needs of their community. With federal student debt relief programs in place and lower interest rates, students turn to the government loans first.
For example, Wells Fargo plays an important role in lending. It is the nation’s second largest private student loan lender. With interest similar to that of mortgages and auto loans and oftentimes signed by a guarantor, there is a good return on the investment. Obtaining money for college is a need of the community and Wells Fargo services the community’s needs.
Student debt has toppled over home mortgages for the largest percentage of debt in households today. Scrutiny over private lenders may be heightened right now, but it doesn’t seem to deter any other banks from processing loans at the moment.
The majority of student debt is with the government. There is little risk in lending government money. Federal debt does not go away without payment of relief options. Government student loans continue to lead the way for college loan disbursement. Lower interest and relief programs are both key factors in students seeking government money prior to teaching out to the private sector.
The Consumer Financial Protection Bureau (CFPB) has focused their attention on educating borrowers on student debt relief programs as they take out the loans. Their hopes is to give each borrower a chance to find financial solutions for themselves without having to rely on student loan relief services or avoiding the debt altogether. Since government relief programs are not offered in the private sector, there is more debt in default. Options such as consolidation will definitely help lower monthly affordability problems, but create more debt over a longer period of time. Relying on credit scores or a guarantor will also prevent most debtors from seeking out a consolidation loan with a private lender. Some seek a secured loan based on the value of their home which could potentially place their home at risk if payments are not made.
Interest on private loans is higher than government loans. Students will usually only go to the private lender after they have exhausted government opportunities. It is important to also seek out any community, academic or athletic scholarships to help lessen total overall school costs.