DISCUSSION

Will discount student loans work as a Prime incentive?

July 25, 2016Written by Tom Ryan

Amazon last week announced a partnership with Wells Fargo to supply student loans at a discount to college students. Amazon Prime Student members can get a 0.5 percent interest rate break when they apply for any of Wells Fargo’s private student loan products. Another quarter of a percentage point comes off when students enroll in monthly auto-pay. The discount will be offered both to students who need loans to attend college as well as those looking to refinance existing loans. Amazon Prime Student basically offers Prime at half price. Under a current promotion “courtesy of Sprint,” Amazon Prime Student is free for six months and includes free two-day shipping, unlimited streaming of TV shows and movies, free unlimited photo storage, and special offers and promotions created just for students. After six months, students can upgrade to Prime for 50 percent off — $49 a year — with the upgrade adding Prime Music and one free pre-released book a month with Kindle First. The program was launched in 2010. The deal is seen as an addition to Amazon's marketing efforts to lure young adults. The online giant has also opened package pick-up outlets, called Campus Pick-up Points, across about a dozen universities over the last year. It also last year reached a deal to operate co-branded websites with three large universities. The discount doesn’t apply to the more common federal student loan, which accounts for more than 90 percent of all student loans. Private loans, which can carry interest well in excess of double federal rates and offer fewer protections, tend to be used when students reach the federal loan limit. Amazon doesn’t incur a financial risk if the loan goes sour. Fine print on the program states Amazon is “not the lender” and is in “no way involved in the underwriting or origination of loans from Wells Fargo.”

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