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Bank of America Corp., the second-largest U.S. bank, said yesterday it will no longer make private student loans, as lenders exit the business amid rising borrowing costs and investor disdain for related securities.
The Charlotte, N.C.-based bank will continue providing government-backed loans, which made up more than 85 percent of its $6 billion in student lending last year, Bank of America said in a statement.
Bank of America joins Citigroup Inc., SLM Corp. and other lenders in tightening loan criteria or exiting parts of student lending in recent months. Increased borrowing costs, cuts in government subsidies for loans and a lack of investor demand for securities backed by loan assets have made the business unprofitable for some lenders.
The bank didn’t explain why it was making the change. A call to Bank of America spokesman Jim Pierpoint wasn’t immediately returned.
Meanwhile, the bank lost a bid to foreclose on 3,400 mortgage loans owned by bankrupt American Home Mortgage Investment Corp.
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