Business

Amazon to enter student loan business

Alma Mater statue Image copyright Getty Images

E-commerce giant Amazon has entered the student loan business, teaming up with US bank Wells Fargo to offer lower interest rates to subscribers of its "Prime Student" services.

For an annual fee "Prime Student" gives subscribers discounts, free delivery and access to Amazon's video streaming.

Wells Fargo is one of the largest providers of student loans in the US.

The deal should help the bank promote products and Amazon attract students.

"Prime Student" subscribers will be eligible for a 0.5% discount on Wells Fargo student loans.

In a statement, Wells Fargo's head of personal lending John Rasmussen said: "We are focused on innovation and meeting our customers where they are - and increasingly that is in the digital space".

Separately, Mr Rasmussen told Reuters, that Wells Fargo was not paying Amazon for connecting the student and the bank.

Amazon charges $49 (£37) a year in the US or £39 in the UK for its "Prime Student" service. The fees are about half of a regular Amazon "Prime" membership.

In an email, Amazon said it has "a track record of investing in great offerings for students" and that it was "excited" about the new partnership.

US student debt

Interest rates for Wells Fargo student loans can be between 3.39% and 9.03% for a variable-rate loan and range from 5.94% to 10.93% for a fixed loan.

In the US the student loan business is a billion dollar industry and Americans are believed to hold over $1 trillion in university-related debt.

Tackling the student debt crisis has been a central issue in the US election. Both Hillary Clinton and Bernie Sanders presented plans to cut that debt and lower the cost of higher education.

Wells Fargo is one of the largest private lenders of student loans in the US. It had $12.2bn in outstanding student loans in 2015.

However, the US federal government remains the largest provider of student loans.

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