Just seven weeks ago Amazon added a new potential perk to Prime Student, the half-price, college-focused version of its membership service: private student loans, through a partnership with Wells Fargo. The deal, a year in the making, positioned the online retailer to take advantage of the $1.3 trillion market for student loans.
But that plan ground to a sudden halt last week. Amazon, a newcomer to the financial services industry, had failed to account for the regulatory mood in Washington, D.C., where private student loan providers have been in the hot seat ever since the establishment of the Consumer Financial Protection Bureau. Behind the scenes, in the weeks following the announcement, nonprofit advocates raised questions about the partnership with lawmakers and CFPB officials, according to the Wall Street Journal. They convinced Capitol Hill that the Amazon-Wells Fargo deal, with its promise of a half-percentage interest rate discount, would lure students who were eligible for federal loans into taking out the partners’ higher-cost private loans.
For an embarrassed Amazon, the dissolution of the deal represents the second troubled education launch in just three months. In June, its new platform for curriculum resources came under fire for containing copyrighted materials, including lesson plans pulled from rival platforms.AH