Chase sent this email blast to financial aid administrators earlier today: Download E-Blast, FFELP Update, 3-16-10
Here is a description of what this means for students:
the 2009-10 academic year. This includes applications submitted through the Chase platform
and all third-party platforms (e.g., Sallie Mae, Great Lakes, AES, ACS, ASA and HESC).
FFELP loan applications received prior to April 17, 2010, will continue to be processed, provided that they are set for first disbursement by May 7, 2010."
The company also noted that they would be suspending loan applications for 2010-11 also, unless ECASLA is extended in its current format:
Note: if ECASLA is extended in its current form for the 2010-11 academic year, we will begin
accepting FFELP loan applications for 2010-11."
Chase becomes the first major lender announcing a suspension of lending activities in 2010 (U.S. Bank announced their suspension of federal loanoriginations in September 2009). In FY09, Chase was the fifth largest originator of federal student loans with $3.5 billion in volume and roughly a 5% share of the FFELP market.
Connecting the dots, this announcement shouldn't be too much of a surprise:
- Chase lost FFELP market share in 2009, growing their new originations only 4% while the overall FFELP market grew 15%
- Chase announced the sale of their federal loan servicing business to ACS in December of 2009
This announcement (and any similar future announcements from lenders that may or may not come) raise an interesting set of questions. Will lawmakers will feel more pressure to extend ECASLA or will financial aid administrators feel more pressure to move to Direct Lending? An SLA flash survey released today found that almost 3 in 4 schools have already committed to Direct Lending for the 2010-11 school year so there may not be many left to convince.