Wells Fargo Stopped Taking New Student Loan Applications

Wells Fargo Stopped Taking New Student Loan Applications

As school students come to phrases with a drastically totally different studying surroundings, some may additionally have to grapple with a smaller record of personal student loan lenders from which to borrow. Wells Fargo, one of many largest non-public student loan lenders, has lower off new loan candidates. Instead, “beginning on July 1, 2020, only customers with an outstanding balance on a Wells Fargo Private Student Loan are eligible to be borrowers on a new private student loan for the 2020-2021 academic year,” Wells Fargo’s web site states. “Wells Fargo has decided to narrow its student-lending focus,” stated Manuel Venegas, a spokesperson for Wells. Students who don’t have a present loan with Wells Fargo are inspired to contact their faculty’s monetary assist workplace to think about different choices, based mostly on a ceaselessly requested questions web page on the lender’s web site.

Private Student Loan Market

As of the March 31, 2020, 92 p.c of student loans have been owned by the Department of Education (DOE). This implies that $1.54 trillion of the $1.67 trillion in excellent student loan debt was owned by DOE, in response to MeasureOne. Private student loans account for less than eight p.c, or $131.8 billion of the student loan market.

Private student loans declined instantly following the Great Recession as banks tightening their underwriting (not like federal loans, non-public student lenders normally run a credit test on potential debtors). Competition from federal loans additionally elevated as Congress allowed graduate students to borrow limitless quantities in 2006 and as restrictions on dad and mom loans have been relaxed. However, extra just lately, the non-public student debt market has been booming and the quantity of personal student loans has grown 71 p.c over the previous decade.

Federal loans are typically preferable for many students as they don’t require a credit historical past or co-signer and supply post-graduation advantages like income-driven reimbursement and forgiveness choices. However, non-public student loans could also be enticing to some students, particularly these with very excessive credit scores who could possibly safe a decrease rate of interest on their loans.

Wells Fargo Was One Of Largest Private Student Loan Lenders

Wells Fargo was a vital participant within the non-public student loan market. According to the Student Borrower Protection Center, it had an 8 p.c market share, with $10.6 billion in excellent non-public student loan debt.

With potential disruptions to the 2020-2021 tutorial calendar and an unsure financial restoration, Wells Fargo could also be making an attempt to chop its publicity to doubtlessly larger loan defaults. As Bloomberg identified, “already, more than 40 million student-loan accounts were in deferment as of mid-June.”

MORE FROM FORBESNew Graduate Students Could Save Over $20,000 On Federal Student Loan Repayment

Conclusion:

While many different choices stay, the lack of a number one participant within the non-public student loan market is not going to be good for competitors, with students doubtlessly dealing with larger charges. Luckily, with the Federal Reserve slashing benchmark rates of interest to close zero, federal student loans for the upcoming 2020-2021 tutorial 12 months have fallen dramatically. It is but one more reason why students ought to prioritize federal loans over non-public ones.

Further Related Reading:

These 10 States Are Suspending Payments For Millions Of Private Student Loan Borrowers

New Graduate Students Could Save Over $20,000 On Federal Student Loan Repayment

Proposal: $1,200 CARES Act Stimulus Checks For 6.8 Million College Students

Elizabeth Warren And Sherrod Brown Unveil Sweeping 6-Prong Consumer Protection Proposal

READ:   Some Student Loans Qualify for Federal Forgiveness Program