Amazon.com Inc. and the Wells Fargo Education Financial Services announced Thursday their decision to provide a new discounted interest rate for Amazon Prime Student customers who apply for Wells Fargo’s private student loan products.
Under the plan, students who have an Amazon Prime Student membership will be offered a 0.5 percent discount on newly originated or refinanced student loans from Wells Fargo. The discount can then be added to the 0.25 percent interest rate reduction given to students who enroll in a plan for automatic payments. In the end, the students can see as much as an 0.75 percent reduction on their student loan interest rate.
“We are focused on innovation and meeting our customers where they are – and increasingly that is in the digital space,” John Rasmussen, Wells Fargo’s head of personal lending group, said in a statement.
“Amazon has an interest in growing their Amazon Student Prime business and clearly we have a commitment to our student lending business and we’re always looking for innovative ways to serve our customers and grow that business,” Rasmussen told Forbes.
“We knew our customers were ever increasingly in the digital space — that wasn’t new news to Amazon — but where we landed is a way to team together is for students to save money.”
In a statement to Fortune, Amazon said the program adds to the benefits it provides to Amazon Prime Student members. It’s “exited to extend this new offering,” the statement reportedly said.
On its website, Amazon clarified: “Amazon is not a lender and is not affiliated with Wells Fargo. Amazon is in no way involved in the underwriting or origination of loans from Wells Fargo. All credit decisions, including application approvals, are made solely by Wells Fargo.”
Matthew Chingos of the Urban Institute told Fortune that the announcement did not make a major dent in the larger student loan landscape. “It’s basically one lender in a market that’s a very small part of the student loan pie,” he said.
“It’s a marketing thing,” he said. “Now Amazon can say, ‘with Amazon Prime Student you get two-day shipping and a discount on your student loans.'” The appeal only lasts till the shopper reads that the discount only applies to private student loans and within that only to those issued by Wells Fargo, according to Chingos.
Amazon Prime Student program allows students to sign up for a six-month, sponsored trial following which they have to pay $49 a year for the membership.