CIT Group Inc said on Thursday it is no longer making student loans, as the struggling finance company moves out of consumer lending and focuses on commercial finance instead.
CIT will still collect payments on its $11.6 billion of student loans, but it will stop making new ones, resulting in a pre-tax charge of $20 million. About $15 million of the charge will be recorded in the second quarter.
CIT may be looking to sell off the student loans still on its books, as it tries to shed assets outside its main businesses to help pay off the estimated $15 billion of debt it has maturing in 2008. About 95 percent of the loans in the portfolio are 97 percent guaranteed against default by the U.S. government.
CIT said on March 20 that it had drawn down its entire $7.3 billion of bank lines to raise cash to pay off debt. The secured and unsecured bond markets where CIT typically funds itself have become increasingly jittery, raising questions about how the company will fund itself. CIT shares have fallen 77 percent since June 2007.
Stopping student lending comes after CIT decided last year to stop making new mortgage loans, and focus instead on commercial finance. CIT still has about $9 billion of mortgages on its balance sheet.
CIT Group Inc.is a leading global commercial and consumer finance company, founded in 1908. CIT has more than $74 billion in managed assets. CIT is a Fortune 500 company and is a part of the S&P 500 Index, and is a leading participant in vendor financing, factoring, equipment and transportation financing, Small Business Administration loans, and asset-based lending, and does business with more than 80% of the Fortune 1000.
The company's global headquarters are in New York City, and the company has more than 7,300 employees in locations throughout North America, Europe, Latin America, and Asia Pacific.