Amazon and Wells Fargo ended their partnership to offer college students a discount on private student loans on Wednesday, quickly abandoning what the bank lauded as a “tremendous opportunity” just six weeks ago.
The deal between the giant online retailer and the nation’s third largest bank by assets represented Amazon’s first foray into the competitive market of lending to college students. For Wells Fargo, which has aggressively tried to build up its student loan business, the partnership was meant to help the bank reach millions of potential customers who shop on Amazon and might be enticed by the bank’s half-percentage point discount on its higher education loans.
Catherine Pulley, a Wells Fargo spokeswoman, said Wednesday that the “promotion for Prime Student members has ended.” She didn’t immediately respond to messages seeking further details. Deborah Bass of Amazon emailed the same statement in response to questions but did not immediately respond to a message seeking additional information.
The companies marketed the deal to college students who use Amazon’s “Prime Student” product, where for about $50 a year college students can enjoy free two-day shipping on select items and instant online access to some television shows and movies. Both Amazon and Wells Fargo hoped the partnership would lead to more customers of each company’s products.
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At least that’s how the two sides described the partnership during its July 21 announcement. As of today, Amazon no longer features Wells Fargo on its student-focused web site and the bank’s Amazon-focused site now redirects visitors to Wells Fargo’s general student loans section.
The two companies had been talking about the partnership for more than a year, according to a July report from the Wall Street Journal.
“We are focused on innovation and meeting our customers where they areand increasingly that is in the digital space,” John Rasmussen, a Wells Fargo executive, said in a July 21 news release. “This is a tremendous opportunity to bring together two great brands.”
It’s another black eye for Wells Fargo’s student loan business, which just last week agreed to pay $3.6 million to the federal Consumer Financial Protection Bureau to settle claims that it misled borrowers, illegally charged certain fees, and processed payments in a way designed to maximize late fees. Wells Fargo neither admitted nor denied wrongdoing.
Consumer advocates quickly assailed the partnership between the two companies after it was announced in July. Pauline Abernathy, a former official in Bill Clinton’s White House who now works for the Institute for College Access & Success, described the arrangement as “the kind of misleading private loan marketing that was rampant before the financial crisis.” She said both companies buried the otherwise high costs and inflexible repayment terms that she said are standard in private student loans, and that the deal was a “cynical attempt to dupe current students.”
Undergraduate students can borrow from the feds at a 3.76 percent interest rate, a loan that effectively acts as an entitlement thanks to virtually no underwriting requirements. But the government caps student borrowing, leaving many to rely on private student loans to fill the gap between college costs and federal loan limits. A review of Wells Fargo’s web site shows student loans that carry interest rates as high as 10.93 percent.
“We congratulate Amazon for deciding to stop promoting Wells Fargo’s costly private education loans. Private loans are one of the riskiest ways to pay for college,” Abernathy said Wednesday.
Wells is based in San Francisco but has its biggest employee hub in Charlotte.