JPMorgan to halt student consolidation loans-memo

WASHINGTON, April 24 (Reuters) - JPMorgan Chase & Co (JPM.N), a major student loan provider, said its Chase Education Finance unit will stop accepting applications for federal student consolidation loans on May 1, according to a memo from the bank to colleges obtained by Reuters on Thursday.

"Chase will temporarily suspend taking new federal consolidation loan applications on or after May 1, 2008. Borrowers who apply for a Fed-Con loan before May 1 are not affected. Existing Chase Fed-Con loan customers will continue to have their loans serviced by Chase," the memo said.

The announcement came amid turmoil in the $85 billion student loan market, which is being buffeted by a capital crunch stemming from the subprime mortgage crisis. Dozens of lenders have withdrawn from the federally guaranteed student loan program or discontinued segments of their loan business.

"We are going to focus on providing loans to current and incoming students. So we have suspended the consolidation loans, which consolidate loans for students once they graduate," said JPMorgan spokesman Tom Kelly

"We continue offering both federal and private student loans to current and incoming students," he said. (Reporting by Kevin Drawbaugh; Editing by Steve Orlofsky)