College students are surprisingly open to the idea of student loans offered by Amazon, according to a recent survey from LendEDU.
LendEDU, a student loan company, surveyed 1,000 currently enrolled college students with student debt about their views on hypothetical student loans from. About two-thirds (66.8%) of respondents said they would use a student loan created by Amazon while 22.3% were unsure, and only 10.9% would not. Forty percent of respondents said they would trust Amazon more than the Department of Education to handle their student loans versus 16.2% who would not.
College students may be open to Amazon student loans because the company has a strong reputation for innovation and cutting-edge technology, Mike Brown speculates in a blog post for LendEDU.
If Amazon is considering entering the student loan market, these survey results are a positive sign, argues Luke Wester in Boss Magazine. The company’s brand may give it a leg up over other student loan providers, he writes.
But do these survey results bode well for student borrowers? Maybe not.
For one thing, Amazon student loans aren’t all that hypothetical. In July of 2016, Amazon and Wells Fargo announced a discount on private student loans for Amazon’s Student Prime members—and received backlash from college access organizations. The two companies offered Student Prime members a 0.5% student loan interest rate discount.
“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,” said Pauline Abernathy, vice president of the Institute for College Access and Success, about the partnership in 2016.
Amazon’s student loan program didn’t last long. Less than six weeks after the initial announcement, the firms abruptly ended their student loan partnership.
While private lenders have attempted to become more consumer-friendly in recent years, private loans have gained a reputation for having inflexible repayment terms and fewer protections than loans offered by the government, Danielle Douglas-Gabriel reported for the Washington Post in 2016. The partnership between Amazon and Wells Fargo highlighted some of those concerns.
And while LendEDU’s survey may suggest that students are open to Amazon loans, other research has found that many students don’t understand how private and federal loans actually work.
Ninety percent of Americans couldn’t answer six basic questions about federal student loans, according to one online poll. And GoodCall, a website that helps consumers make smart financial decisions, found that are many students mistakenly believe that private loans are all the same.
Whether or not Amazon re-enters the student loan market, student borrowers (and their families) need to be financially literate enough to make smart loan decisions (Brown, LendEdu, 6/25; Wester, Boss Magazine, 6/25).