student on laptop

Will discount student loans work as a Prime incentive?

Amazon last week announced a partnership with Wells Fargo to supply student loans at a discount to college students.

Amazon Prime Student members can get a 0.5 percent interest rate break when they apply for any of Wells Fargo’s private student loan products. Another quarter of a percentage point comes off when students enroll in monthly auto-pay.

The discount will be offered both to students who need loans to attend college as well as those looking to refinance existing loans.

Amazon Prime Student basically offers Prime at half price. Under a current promotion “courtesy of Sprint,” Amazon Prime Student is free for six months and includes free two-day shipping, unlimited streaming of TV shows and movies, free unlimited photo storage, and special offers and promotions created just for students. After six months, students can upgrade to Prime for 50 percent off — $49 a year — with the upgrade adding Prime Music and one free pre-released book a month with Kindle First. The program was launched in 2010.

The deal is seen as an addition to Amazon’s marketing efforts to lure young adults. The online giant has also opened package pick-up outlets, called Campus Pick-up Points, across about a dozen universities over the last year. It also last year reached a deal to operate co-branded websites with three large universities.

The discount doesn’t apply to the more common federal student loan, which accounts for more than 90 percent of all student loans. Private loans, which can carry interest well in excess of double federal rates and offer fewer protections, tend to be used when students reach the federal loan limit.

Amazon doesn’t incur a financial risk if the loan goes sour. Fine print on the program states Amazon is “not the lender” and is in “no way involved in the underwriting or origination of loans from Wells Fargo.”

BrainTrust

"If Wells Fargo does not screw up the lending process or have too heavy a hand throughout the life of the loan, this could be a win-win-win situation."

Max Goldberg

President, Max Goldberg & Associates


"The one thing that Amazon seems to understand better than anyone else is how important relationships are."

Gene Detroyer

Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.


"This makes me wish my kids were still students, especially as two of them are still paying off loans!"

Anne Howe

Principal, Anne Howe Associates


Discussion Questions

DISCUSSION QUESTIONS: Will Amazon engender loyalty with college students by offering student loan discounts? Is the overall Amazon Prime Student program going overboard with incentives or still lacking?

Poll

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Max Goldberg
7 years ago

Bravo to Amazon. They’ve found another benefit for Prime membership and can cement customer relationships at an early age. For students, any break in the price of loans is welcome. If Wells Fargo does not screw up the lending process or have too heavy a hand throughout the life of the loan, this could be a win-win-win situation.

Mohamed Amer
Mohamed Amer
Active Member
7 years ago

Peter Schwartz classic, “the Art of the Long View,” addresses planning for a future in a world full of uncertainty. In the case of Amazon, we have a company that embraces the long view yet is firmly grounded in classical competitive economic warfare.

This is classic strategy applied to the digital age. Amazon is looking at lifelong value of their customers, in this case college students, and beginning to build relationships that will last a lifetime. The company is creating situations that weave it into lifestyles in a very sticky way. Amazon is doing a great job of integrating the brand into everything we do, need and desire.

Gene Detroyer
Noble Member
7 years ago

The one thing that Amazon seems to understand better than anyone else is how important relationships are. They understand that the deeper the relationship, the more a customer (or potential customer ) will act and react with Amazon. The more they engage with Amazon, the more opportunity Amazon has to provide products and services that in the end will grow the company.

Naomi Shapiro
7 years ago

My BrainTrust colleagues’ eloquent responses say it all. The ONLY scary part is what CAN’T Amazon do? Does anyone worry about Amazon’s all-encompassing existence? Maybe we’ll soon be hearing “Amazon for President”!

Kim Garretson
Kim Garretson
7 years ago

There has been a lot of publicity about for-profit colleges pushing students into private loans on top of their federal loans. And some steps have been taken by governments to stop this practice. I would hope that both Wellls Fargo and Amazon can get enough publicity for this program that if a student at a for-profit is pressured for private loans by the schools, they know they have what may be a much-better alternative.

Lee Peterson
Member
7 years ago

Like all things Amazon, it’s a very good test. If this flies, they could garner customers for life in a lot of very creative ways. Remember the Fire Phone? Fail fast = digital native thinking. I wouldn’t poo-poo anything they do.

Anne Howe
Anne Howe
Member
7 years ago

This makes me wish my kids were still students, especially as two of them are still paying off loans! Amazon clearly understands the value of being known as being helpful to young consumers, despite the fact that what they are offering addresses only 10 percent or less of the loan market for students. Gotta give them both credit for taking a bold step. Wells Fargo gets a shot at holding on to young customers as well.

Kenneth Leung
Active Member
7 years ago

Amazon understands it is more than a retailer, it is a lifestyle brand offering products, entertainment and computing services. The partnership with Wells Fargo doesn’t hurt the brand as long as all the fine print is well laid out and it is clear that it is a benefit of membership. Reminds me of the old Amex slogan “membership has its privileges” done in a new way.

Carlos Arambula
Carlos Arambula
Member
7 years ago

With the demise of bookstores, Amazon is already part of high school students’ educational experience, so why not extend that relationship to other organic functions during their entire educational experience.

I can think of several other services Amazon can offer college students besides student loans, phone service, digital storage, and music — I’m certain they have a list, and the brand loyalty, the purchase habits and funnels they will create will benefit Amazon for decades.

Amazon doesn’t have to go overboard with any of their services, it just needs to meet expectations.

Craig Sundstrom
Craig Sundstrom
Noble Member
7 years ago

I’ll play devil’s advocate here: Amazon may have steered clear of financial risk, but what about PR risk if many of the loans go sour? Should a retailer really be in the business — no pun intended — of encouraging students to take out even MORE loans than they already do (while they become even less able to pay them back by buying things at Amazon)? I’ll wish everyone well, but be crossing my fingers.