A student loan company offers new borrowers a free year of MoviePass

Want a free year of MoviePass? All you need is a student loan that’s eligible for refinancing.

The movie theater subscription company announced a partnership this week with Laurel Road, a lender that offers student loan borrowers the opportunity to refinance their debt at a lower interest rate. The deal provides borrowers who refinance with Laurel Road a year-long MoviePass  membership, allowing them to see one movie per day for free at participating theaters. Borrowers who already have a MoviePass membership still qualify for a free year of service.

The announcement is the latest example of refinancing companies angling to lure relatively high-income, credit-worthy student loan borrowers. With several firms participating in the student loan refinance business and only a limited number of borrowers who qualify for their services, competition has grown fierce. Companies offer any number of perks hoping to lure these borrowers and ultimately keep them as customers when they’re ready to move into financial products beyond student loans. After all, borrowers with a high credit score and high earning potential are more likely to repay lenders.

The idea to offer a free year of MoviePass to student loan borrowers came after a few months of partnership between the two companies, including co-sponsoring events at South by Southwest, the annual tech, media and film festival, said Alyssa Schaefer, Laurel Road’s chief marketing officer. For Laurel Road, the MoviePass partnership is part of a larger, growing marketing strategy that includes a recent New York City ad campaign, she said.

“They have a large base of customers overall and within that, a large base of customers that fit the demographics that we market to as well,” Schaefer said. “This partnership just adds to our overall story and what we do.”

At the same time, for a company like MoviePass, the young, upwardly-mobile borrowers served by lenders like Laurel Road are a valuable demographic. Bringing more of these customers into the fold — even temporarily for free — has the potential to help MoviePass’s business, which is running low on cash.

Put bluntly: “College educated people make more money,” said Ben Miller, the senior director of postsecondary education at the Center for American Progress, a left-leaning think tank.

MoviePass could get more leverage

The partnership is both about providing a perk to current MoviePass members and helping the company lure new ones, according to Khalid Itum, vice president for business development at MoviePass. “This partnership will connect us with a population that we believe will find great value in our offering,” he wrote in an email.

Right now, MoviePass essentially subsidizes movie-goers’ tickets in a way that results in a deal for the consumer and often a loss for the company. MoviePass says it has a plan to make the numbers work, including by striking deals with theater chains, selling ads within its app and harnessing user data to make money. In any of these ventures, having more users provides MoviePass with more leverage when cutting deals with movie chains and other companies, said Erik Gordon, a professor at the University of Michigan’s Ross School of Business, who has studied MoviePass’s finances.

“If at some point, MoviePass actually controls enough of the customers, then they will have more ability to get the big chains to cut deals with them,” he said.

Gordon also suspects that having more users with similar demographics to those who would refinance a student loan could be particularly valuable to MoviePass from a data standpoint. Itum said that “user data was not the motivation for this partnership.” Still, the company has indicated that the data it gathers on its millions of customers could make it integral to the movie-going business, which would help it make more money.

“People at the age where they are refinancing student loans, they’re no longer students, they’re out and they’re employed, and a pretty desirable demographic to gather data from,” Gordon said.

For its part, MoviePass says the benefit of the partnership to the company is to “bring value to our subscriber base” as well as provide an opportunity to conduct integrated marketing campaigns “so that our subscriber comes to recognize and love the brands we work with.”

If this works for Laurel Road, borrowers could see other offers

For Laurel Road, the MoviePass deal provides the company with a buzzy way to reach borrowers, amid a competitive student loan refinancing environment where traditional modes of advertising may already be saturated, said Mark Kantrowitz, a student loan expert. If this works for Laurel Road, Kantrowitz said he expects to see other lenders experiment with providing access to products and services that college students and recent graduates are interested in, but may be unwilling to shell out for themselves.

SoFi, perhaps the best-known name in the student loan refinance market, already offers borrowers career counseling and other networking services, as well as happy hours and parties. In 2016, Wells Fargo’s   private student lending arm attempted to lure borrowers through an Amazon Prime   membership discount. That deal ended abruptly about a month after the partnership was announced, amid concern from consumer advocates that the partnership would lure college students away from the federal student loan program, which typically offers more protections for borrowers than private loans.

“You’ll see a lot of experimentation by lenders to see what has an impact,” Kantrowitz said. And indeed, Schaefer said the MoviePass partnership is just one example of “where we are really focusing on our marketing strategy and trying new things.” Laurel Road is specifically interested in partnerships and offers that meet borrowers where they are, she said.

But borrowers shouldn’t take their eye off the ball

But borrowers should be wary of these offers, Kantrowitz said. The MoviePass deal is “potentially shifting your attention away from what really matters, which is the cost of the loan and the other terms of the loan.”

There can be some significant drawbacks to refinancing. Borrowers who refinance their federal student loans with private lenders typically lose out on many of the protections offered through the federal student loan program, including the ability to pay back the debt as a percentage of your income — a way to make loan repayments less financially burdensome.

Whether a borrower may need to access these income-driven repayment plans or other features of federal loans not typically available on the private market is something they should consider before jumping at the chance for a free MoviePass, Miller said.

“Losing the benefits of income-driven repayment could affect you for decades, long after you forgot the plot,” of the latest hit super hero movie, he said.