Amazon Prime Loans: Read The Fine Print

The Washington Post: “Wells Fargo is offering customers discounted interest rates on private student loans, creating a partnership with the online retail giant at a time when private lenders are fighting for market share.”

“Amazon Prime Student subscribers who apply for any of the bank’s education loan products are eligible to have their interest rate lowered by half a percentage point. Wells will take off an additional quarter of a percentage point for borrowers who enroll in an automatic monthly loan repayment plan. Interest rates on Wells undergraduate loans for four-year colleges range from 5.94 percent to nearly 11 percent on a fixed-rate loan and 3.39 percent to 9.03 percent on a variable-rate loan. Students who enlist a parent or grandparent on the loan can get lower rates because co-signers are obligated to repay the debt if the borrower does not.”

“As it stands, interest rates on federal student loans are at an all-time low. Undergraduate students can expect to pay 3.76 percent in interest on new Stafford loans for the 2016-2017 academic year, while graduate students will be charged 5.31 percent interest. Government loans are only offered at fixed rates and students don’t need co-signers with stellar credit to qualify for the lowest rate. What’s more, federal student loan borrowers can take advantage of the government’s income-driven repayment plans that cap monthly payments to a percentage of their earnings. There is nothing comparable in the private market.”

Pauline Abernathy, vice president of the Institute for College Access & Success (TICAS), comments: “Amazon and Wells Fargo are trumpeting a discount while burying the sky-high rates on these private loans and without noting that they lack the consumer protections and flexible repayment options that come with federal student loans. It is a cynical attempt to dupe current students who are eligible for federal students loans with a record-low 3.76 percent fixed interest rate into taking out costly private loans with variable interest rates currently as high as 13.74 percent.”