Student loan debt may be preventing borrowers from buying a home, starting a family, and saving for retirement, but for Discover Financial Services, it’s helping it boost earnings and revenue.
Late last week, Discover Financial Services reported a 13 percent jump in net income during the fourth quarter and a 4 percent rise in revenue. Much of this was thanks to a surge in loans, with the business having its best growth rate in 15 years, according to TheStreet.com.
Discover said loans increased 7 percent, in total, hitting $77.3 billion. For the full year, new student loans were up 9 percent to $1.4 billion. Meanwhile personal loans increased 31 percent to $4 billion.
Discover cited enhancements to its Discover Student Loan products and strong execution for the surge during both the quarter and the full year. Some of those upgrades included raising the maximum loan amounts, enhancing its mobile website and online applications, and rolling out a tool in which customers can see what their interest rates and monthly payments on loans will be without hurting their credit.
Going forward Discover has ambitions to grow the loan segment of its business even more, with Chief Executive David Nelms targeting total loan growth of 7.5 percent in 2017.
The surge in student loan lending at Discover Financial Services comes at a time when college graduates and dropouts alike are staring at record student loan debt.
With the cost of a college education constantly rising, many borrowers have to look beyond the federal government to fund their higher education ambitions. Private lenders have been getting back into the game after shying away from it for years after the government seized control over the majority of the market. They are being supported by the success of a crop of fintech startups that have splashed on the scene in recent years.
While the market for private student loans isn’t huge, it is a growing one. MeasureOne, a higher education data and analytics company, found that as of the third quarter of 2016, private student loans accounted for 7.5 percent, or roughly $102 billion, of total outstanding student loan debt.
Author: Donna Fuscaldo
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