After announcing the formation of a new partnership to offer private student loans to students with an Amazon Prime Student account, Wells Fargo and Amazon quietly terminated the program and their partnership last week without much explanation. Now, information has come to light indicating that the program came under heavy fire from politicians who have worked against private student loan lenders who they believe charge exorbitant interest rates and provide borrowers with too few repayment options, especially when compared to the options provided by federal student loans.
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One of the first to criticize the Amazon-Wells Fargo program was The Institute for College Access and Success (TICAS). This nonprofit group works to ensure that everyone has access to an affordable college education. TICAS believed that the offer would lead many students to take out private student loans carrying interest rates that are more than three times the current federal rate. In addition to publicly voicing their opposition to these loans, TICAS specifically presented their complaints to several senators.
One of these senators, Sherrod Brown, spoke with the Consumer Financial Protection Bureauabout his concerns that Amazon and Wells Fargo were using marketing strategies designed to deceive students into believing that the loans they would receive would have low interest rates. There were also concerns about clarity regarding whether or not these discounted interest rates would be locked in for the life of the loan.
As a result of these concerns, Amazon and Wells Fargo ended their partnership on August 31.
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