Amazon Teams With Wells Fargo To Offer Discounted Student Loans


Need another incentive to sign up for an Amazon Prime membership? If you are a college student or about to become one, the online retailing giant has come up with a creative and innovative offer that gives students another attractive reason to enroll.

Amazon has recently teamed up with financial juggernaut Wells Fargo to offer student loans with a discounted interest rate. Exclusive to students, Amazon’s Student Prime program members can apply for a new, private loan with the lender. Students with existing loans have the opportunity to refinance with the bank as well.

Wells Fargo will be the exclusive student loan provider to Amazon Student Prime members. [Image via DW labs Incorporated/Shutterstock.com]

“Amazon has an interest in growing their Amazon Student Prime business and clearly we have a commitment to our student lending business and we’re always looking for innovative ways to serve our customers and grow that business,” Wells Fargo head of personal lending John Rasmussen told Forbes. “We knew our customers were ever increasingly in the digital space — that wasn’t new news to Amazon — but where we landed is a way to team together is for students to save money.”

Prime members that qualify will get a 0.5 percent reduction in interest rate on their Amazon student loan. Students can save an additional 0.25 percent by signing up for automatic payments. While that may not sound like much, every penny helps, especially when trying to pay for college.

While the loan package is offered only through Student Prime, Amazon is making it clear to members they are not associated with Wells Fargo or their underwriting guidelines.

“Amazon is not a lender and is not affiliated with Wells Fargo. Amazon is in no way involved in the underwriting or origination of loans from Wells Fargo.”

The Amazon-Wells Fargo student loan deal has been quietly in the works for more than a year. The partnership, described as a multiyear agreement, will make Wells Fargo the only lender providing loans to Prime Student members. According to the Wall Street Journal, neither company is compensating the other in the deal.

After plummeting during the recession, private student lending is again becoming a popular vehicle to obtain college funding. Between July 2015 and March 2016, Sallie Mae (SLM Corp.), Wells Fargo, and Discover Financial Services distributed nearly $6.46 billion in loans, a 7 percent increase over the same period the year before.

Wells Fargo is the largest U.S. bank by market value and the second-largest private student loan provider, lagging behind Sallie Mae by a huge margin. The San Francisco-based lender has been busy over the last 10 years refinancing current student loans, but that market has become crowded with online competitors like Social Finance Inc.

College students can now apply online for a loan through Amazon’s Student Prime program. [Photo by Glen Cooper/Getty Images]

With its new partnership with Amazon, Wells Fargo could get a competitive upper hand. The Amazon student loan interest rates will be more in line with other lenders, such as Discover and Citizens Financial Group, both of which have been rapidly gaining market share in the last few years. The small rate discount could make Wells Fargo loans more attractive and affordable for struggling students.

While a federal student loan offers the same interest rate to all students regardless of credit score, a private student loan interest rate can vary depending on the lender’s risk assessment. A bank reviewing a student’s loan application will determine a rate based on a number of underwriting factors, including credit score.

The Student Prime program is a subscription-based service offered to college students by Amazon that costs $49 per year, essentially half as much as the regular Amazon Prime. Students can get free two-day shipping and unlimited streaming movies. While the e-commerce behemoth hopes the Amazon student loan incentive will increase membership, Wells Fargo has a marketing opportunity with the potential to reach millions of new borrowers in a very short period of time.

[Photo by Kevork Djansezian/Getty Images]

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