Slightly more than a month after the partnership began, Wells Fargo has stopped offering discounted interest rates on private student loans to Amazon.com customers.
Neither of the companies are speaking out on the reason for the separation. The only thing either one has said is that the partnership will no longer be continuing. The Wells Fargo web page that had previously discussed the benefits for Amazon.com customers now redirects users to a listing of its student loan products.
The partnership had allowed Amazon Prime Student subscribers the opportunity to have their interest rates lowered by half a percentage point if they applied for one of the education loans offered by Wells Fargo. That discount could then be stacked on top of a separate 0.25% interest rate reduction offered to students who sign up for automatic payments.
For around $50 a year, Amazon Prime offers subscribers access to free two-day shipping on select items, as well as instant access to a variety of television shows and movies.
Wells Fargo’s head of education financial services, John Rasmussen, had called the partnership “a tremendous opportunity to bring together two great brands” when it was first announced in July, writes Danielle Douglas-Gabriel for The Washington Post.
However, advocacy groups have criticized the move as an attempt to push students into obtaining high-cost private loans that do not come with the consumer protections and flexible repayment options offered by federal student loans.
Wells Fargo undergraduate loans for four-year schools come with interest rates ranging from 5.94% to almost 11% on a fixed-rate loan, and 3.39% to 9.03% on a variable-rate loan. In addition, rates offered by the bank for community and for-profit colleges can reach almost as high as 14%.
Meanwhile, new government loans for the 2016-17 school year for undergraduates charge 3.76% interest, and 5.31% interest for graduate students. Federal loans are only available at fixed rates, allowing students the freedom to not need a co-signer in order to qualify for the best rate. The government also offers an income-based repayment plan that places a cap on monthly payments to a percentage of their earnings, reports Maggie McGrath for Forbes.
“We congratulate Amazon for deciding to stop promoting Wells Fargo’s costly private education loans,” said Pauline Abernathy, executive vice president of the Institute for College Access and Success (TICAS). “Private loans are one of the riskiest ways to pay for college, with none of the flexible repayment options and consumer protections that come with federal student loans. Students should consider other schools if a school requires them to take out a private loan.”
The promotion comes to an end only a week after Wells Fargo came to an agreement with the Consumer Financial Protection Bureau. The bank has promised to pay $4 million in penalties for not only charging illegal fees on student loans, but also for misrepresentation of payments and failing to update inaccurate credit report information. The bank has not admitted to the charges, but they have not denied them either.