Amazon is getting into the student loan business, sort of. The seller of not quite — yet — announced Thursday a partnership with Wells Fargo to offer student loan discounts to members of its Prime Student program.
Prime Student members pay $49 a year for free two-day shipping, unlimited video streaming and photo storage, and other perks. From now on, they will be eligible for a half percent interest rate reduction on all Wells Fargo private student loans.
“We knew our students and their families were increasingly online,” said John Rasmussen, who heads the bank’s personal loans group.
The partnership is a way to find new borrowers where they hang out — and potentially more affluent ones, like those who subscribe to Amazon Prime.
While most student loans are funded by the federal government, private loans have rebounded significantly since the recession. Over the past five years, lending volume has reached about $10 billion a year, Mark Kantrowitz said with Cappex.com.
Banks “still have limited funds available to make loans, so they want to make those loans to borrowers who will be the most profitable,” he said. “Everyone wants the best credit customers.”
The savings are not huge. For a typical 10-year student loan of $15,000, a borrower can save about $50 a year, Kantrowitz said, which is about enough to cover that Prime Student membership.
For Amazon, the deal is just another way to lure people to its Prime service at an early age, said analyst Michael Pachter of Wedbush Securities. Students already get a six-month free trial and then pay half the normal membership fee for the service.
“Anything they can do to make that more appealing is going to, over the lifetime of a person’s membership, drive thousands, if not hundreds of thousands of dollars in purchases through the site,” Pachter said.
College students are a good bet, he said. While they’re not likely to buy much from Amazon while they’re getting by as college students, as graduates they’re likely to earn more than those without a degree.
