Wachovia Corp. confirmed today that it is cutting back on student loans.
At the close of business today, the Charlotte bank will stop accepting applications for private, undergraduate student loans. The bank will continue issuing private loans for graduate students, and it will also continue issuing student loans backed by the federal government.
In a letter sent to colleges Tuesday, Wachovia said the move was “in light of the current overall financial industry environment.”
Ferris Morrison, a spokeswoman for the bank, added: “We are constantly evaluating our organization in the current environment, to ensure that we're doing what's best for our customers, our shareholders, and our company, and at this time we thought it was prudent to stop accepting private undergraduate student loans.”
Student loans that have already been issued will not be affected.
Wachovia has about $9.9 billion in student loans on its books, encompassing about 4 percent of its consumer portfolio. The bank does not break down what percentage of its student loans are private, but Morrison said it's “a very small portion.”
Private student loans can be more lucrative for banks then federal student loans, but they can also be riskier. Their interest rates are determined by the market, so they can command higher rates than federally backed loans, but they have no government guarantee.
Other banks have already started to put the brakes on private student loans, including Charlotte's Bank of America Corp. In April, Bank of America discontinued issuing all private student loans.