Wells Fargo is now offering Amazon Prime members a discount on interest rates for private student loans in a unique partnership with the online retail giant.
"We are focused on innovation and meeting our customers where they are – and increasingly that is in the digital space," Wells Fargo's head of education financial services, John Rasmussen, said in a statement. "This is a tremendous opportunity to bring together two great brands."
While private lenders continue to fight for market share, Amazon Prime Student subscribers could see their interest rates lowered by half a percentage point when they apply for any of the education loan products at the bank. An additional quarter of percentage point will be taken off by the bank for those who enroll in an automatic monthly loan repayment plan. Interest rates at the bank for undergraduate loans vary from 5.94% to just about 11% on a fixed-rate loan and 3.39% to 9.03% on variable-rate loans. If a parent or grandparent is included on the loan as a co-signer, students are able to get a lower rate, writes Danielle Douglas-Gabriel for The Chicago Tribune.
Although Amazon Prime Student memberships come at a cost of $49 per year, company officials say members do not need to be subscribers of the service throughout the life of the loan to benefit. The subscription service for college students includes unlimited two-day shipping on over 30 million items.
"Of course, Amazon is probably hoping that students will continue with Amazon Prime after they graduate, and Wells Fargo is probably hoping this will increase their loan volume," said Mark Kantrowitz, publisher of Cappex.com, a college and scholarship search site. "It seems like a win-win."
Wells Fargo called the partnership a marketing opportunity for the bank. John Rasmussen, head of Wells Fargo's personal lending group, said the bank is "focused on innovation and meeting our customers where they are–and increasingly that is in the digital space."
Rasmussen went on to say that Amazon is looking to increase its Prime membership subscriptions, while Wells Fargo is seeking to push the idea that it is "here to help" students and families afford higher education. He added that the program will not only highlight the discounts for students offered by Amazon, but will also allow Wells Fargo to take advantage of the access to college students that Amazon currently has. Amazon has said it will promote both Student Prime and the partnership with Wells Fargo through all of its channels and platforms.
While Amazon has said it is "excited to extend this new offering," the company included a statement on its landing page ensuring that customers understand it is in no way affiliated with Wells Fargo or involved in the underwriting or origination of loans from the company.
However, Matthew Chingos, who studies student loan debt at the Urban Institute, said the deal is not significant when it comes to the student loan landscape as a whole, calling it a "marketing thing." He added that while Amazon can say members will get a deal on shipping and student loans, it only applies to private student loans and only those issued by Wells Fargo, writes Claire Zillman for Fortune.
Undergraduate borrowers typically only take out private student loans when they reach federal loan limits.