Amazon.com announced Thursday (July 21) that it is getting into the student loan market. The eCommerce giant is teaming up with Wells Fargo to give student loan borrowers a break on their loans.
Under the terms of the new deal, Amazon Prime Student account members who apply for any of Wells Fargo’s private student loan products will get a lower interest rate on their loan.
“We are focused on innovation and meeting our customers where they are – and increasingly that is in the digital space,” said John Rasmussen, Wells Fargo’s head of Personal Lending Group in a press release. “This is a tremendous opportunity to bring together two great brands. At Amazon and Wells Fargo, delivering exceptional customer service and helping customers are at the center of everything we do.”
According to the companies, borrowers who are also Amazon Prime Student customers will get a 0.50 percent interest rate discount. They can get an additional 0.25 percent interest rate reduction by enrolling in one of Wells Fargo’s automatic monthly loan repayment plans. Based on Wells Fargo’s interest rates published on its website, the company charges 3.39 percent to 9.03 percent interest for variable-rate student loans and between 5.94 percent and 10.93 percent for a fixed rate student loan. As part of the deal, Amazon agreed not to partner with other student loan lenders, although Wells Fargo can add on additional partners.
The new partnership between Amazon and Wells Fargo comes at a time when the cost of a college education is on the upswing and families are struggling to find ways to pay for it. For a long time banks had shied away from the student loan market, but the entrance of FinTech startups in the space have woken them up, which is why more traditional banks are focusing more of their efforts on student loans. While students can save money by refinancing their existing student loan debt, a recent survey showed many borrowers have no idea they may be able to get a better interest rate on their debt.