Wells Fargo, Amazon kill discount student loan offer after only 6 weeks

Neither company specified a reason why the plug was pulled.
By Doug G. Ware  |  Sept. 1, 2016 at 4:06 PM
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SAN FRANCISCO, Sept. 1 (UPI) -- E-commerce giant Amazon.com and Wells Fargo & Co. have mysteriously decided to kill an offer of low interest rate college loans for student customers -- less than two months after it was first announced.

Representatives of both companies confirmed the end of the deal Wednesday, meaning the companies will no longer offer the discount rates for Amazon Prime Student customers on Wells Fargo's private student loan products.

When they announced the offer in July, both companies hailed it as an opportunity for customers seeking higher education to take advantage of cheaper rates as a benefit of their Amazon Prime membership.

"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," John Rasmussen, chief of Wells Fargo's Personal Lending Group, said in a news release on July 21 announcing the venture.

The Wall Street Journal reported earlier this summer that the program was more than a year in the making, and was managed by the bank's Education Financial Services division.

Thursday, neither company gave a reason why they've pulled the plug after just six weeks -- leaving observers to surmise that perhaps the venture simply wasn't worth Wells Fargo's while.

The deal also gave Amazon Prime Student customers, who pay $50 per year for membership, unlimited free two-day shipping for tens of millions of items on Amazon.com.

As part of the deal, Wells Fargo coupled a half-percent interest rate discount with a quarter-percent reduction for borrowers who enroll in automatic monthly repayment plans.

Though the net discount may not have seemed substantial, it did aim to save customers a little bit more cash in a climate where more students are turning to banks for private funding to help with college -- often to supplement insufficient and capped loan amounts ($5,500 for dependent freshmen) from the federal government.

Analysts saw the move as an attempt by Wells Fargo to get a stronger foothold in the competitive private student loan market -- in which it currently places second, by volume, to Sallie Mae. Others viewed it as a shameless attempt to gouge prospective student customers.

Expert Pauline Abernathy, a former official in the Bill Clinton White House, called the loan offer a "cynical attempt to dupe current students" -- and said it's exactly the type of loan marketing that ran rampant as the financial crisis loomed a decade ago.

"We congratulate Amazon for deciding to stop promoting Wells Fargo's costly private education loans," she said. "Private loans are one of the riskiest ways to pay for college."

The end of the program is the second student loan-related setback for Wells Fargo in as many weeks. Last week, while not admitting any wrongdoing, the bank agreed to pay $3.6 million to the Consumer Financial Protection Bureau to settle claims it misled borrowers.

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