I Like My Student Loans Like I Like My Ribs - Prime. Amazon Prime.

When I first heard the news that Amazon would be partnering with Wells Fargo to provide discounted student loans to college students with a Prime Student Membership, my first thought was:

“Can I get free 2-day shipping on those loans?”

I e-mailed Mr. Bezos regarding this inquiry. I have yet to receive a response.

Jeff, throw-in some two-day free shipping please!

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From a business perspective, Amazon and Wells Fargo’s partnership seems like a holy matrimony: nearly half of all U.S. households have one person with a Prime membership. According to the National Center for Education Statistics, about 20.2 million students were enrolled in college in Fall 2015.

Assuming that a majority of U.S. households have at least one college aged student dependent on them, then for Amazon, there’s a convenient and lucrative opportunity to market private student loans to them via Prime membership. In addition to that, considering the fact that college tuition continues to rise without an end in sight, Wells Fargo is in a prime (see what I did there?) position to provide students with an alternative option to finance their education.

Clearly, it’s a win-win for both companies. But is it a win for college students as well?  

I think my student loans are in here!

Student debt is the largest source of personal debt that American’s carry today, totaling about 1.3 Trillion dollars. As a college education becomes more important to securing the American dream, students are going to do everything they can to ensure their financial future via college. Whether that’s by applying and receiving outside scholarships, earning need and/or merit-based financial aid, working one or multiple part and/or full-time jobs, and also taking out student loans.

With Wells Fargo offering student loans with variable interest rates ranging from 3.39% to 9.03% APR and fixed interest rates from 5.94% to 10.93% APR, it may be possible that a college student would be able to get a discounted Wells Fargo loan at a rate competitive with federal subsidized and unsubsidized loans, which are currently fixed at 3.76%. 

Amazon’s entry into the student loan market marks a sobering view regarding financing higher education – student loans are here to stay. This telling quote from Jeff Bezos himself reveals all:

“I very frequently get the question: 'What's going to change in the next 10 years?' And that is a very interesting question; it's a very common one. I almost never get the question: 'What's not going to change in the next 10 years?' And I submit to you that that second question is actually the more important of the two -- because you can build a business strategy around the things that are stable in time. ...And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.” – Jeff Bezos

Here's Jeff hoping someone will ask him what's not going to change in 10 years!

Alright Jeff, I'll go ahead and bite:

What’s not going to change in the next 10 years? The rapid rise in the price of college. The costs of college continue to rise unabated, according to the College Board. Here are two staggering facts surrounding the rise in college for four-year public and private colleges:

• Average published tuition and fees at public four-year colleges and universities increased by 13% in 2015 dollars over the five years from 2010-11 to 2015-16, following a 24% increase between 2005-06 and 2010-11.
• Average published tuition and fees at private nonprofit four-year colleges and universities increased by 11% in 2015 dollars over the five years from 2010-11 to 2015-16, following a 14% increase between 2005-06 and 2010-11. 

Data from the College Board detailing the rise in the cost of higher education across various types of institutions.

Amazon’s awareness of this constant rise of the cost of American higher education is shown in their nascent venture into the private student loan market with Wells Fargo. Not only will they be able reach college students at a more opportune time as they figure out to pay for college, but also Amazon’s discounts on private student loans from Wells Fargo serves as an entry point for these same college students to purchase a myriad of items with two-day shipping as well.

' What's not going to change in the next 10 years?' - Jeff Bezos

It’s a clever play that will only strengthen Amazon’s grip on the retail industry. Amazon's business strategy recognizes that the rise in student loan debt will continue to be stable in time.

What do you think about Amazon's partnership with Wells Fargo to provide discounted private student loans?

Who would like some ribs right now? I know I would.

Let me know in the comment section below!

#StudentVoices

#EdInsights

Frederick Daso is a rising senior at the Massachusetts Institute of Technology, majoring in Aerospace Engineering and minoring in Political Science. He is interested in learning more about or exploring opportunities in engineering, technology, management consulting, and/or journalism. Feel free to contact him at fdaso@mit.edu to talk about the article!