STOCKHOLM — Klarna, the Swedish buy-now-pay-later giant whose business model rests on the belief that any purchase under $300 should be split into four installments spaced just far enough apart to forget the first three, announced Friday it will begin financing federal student loan payments for American borrowers, allowing customers to take out a small short-term loan in order to make a payment on a much larger long-term loan.
The product, branded Klarna Studi, launches in 38 states next week, timed to the official end of the SAVE plan and the resumption of interest accrual for roughly 8 million borrowers, many of whom are receiving their first real bill in five years and reacting to it the way a deer reacts to a Subaru. “Borrowers told us they wanted more options,” the company’s press release read, before listing one option.
An internal pricing sheet reviewed by mmnn shows the Klarna Studi loan carries a flat $4.99 service fee, a 29.99% APR if not repaid in 30 days, and an automatic enrollment in a $7-per-month “financial wellness” subscription that, among other things, sends users a weekly email reminding them they are in debt.
A 31-year-old paralegal in Cleveland who agreed to discuss the product on the condition that her servicer not find out said she had recently used Klarna to finance an $84 anniversary dinner, a $612 student loan payment, and the late fee on the previous Klarna loan. Asked which of the three she was furthest behind on, she paused for what she described as “a long time.”
Renata Boczek, a senior consumer credit researcher at the Atlantic Heartland Project, called the rollout “the first publicly disclosed instance of a federal student loan servicer and a buy-now-pay-later platform being legally permitted to debit the same checking account on the same Tuesday for two separate payments toward the same underlying loan.” She added that the structure was, technically, “not illegal in 41 states.”
Klarna’s American CEO defended the product in a LinkedIn post that used the phrase “democratizing access to debt service” twice and the word “runway” once. He noted that 73% of Studi’s pilot users had reported feeling “more in control of their finances,” a statistic the company arrived at by surveying users immediately after their first payment cleared and before the second one came due.
The Department of Education declined to comment on whether the arrangement violated any provision of its servicer contracts, citing the fact that no one currently working at the Department of Education had been there long enough to know what the servicer contracts said. A spokesperson confirmed the agency was “monitoring the situation,” which she clarified meant a single staff attorney had bookmarked Klarna’s homepage.
Reaction on TikTok was muted. A finance creator with 412,000 followers posted a 14-second video describing Studi as “just another bill that becomes a different bill,” then disclosed in the caption that the video was sponsored by Klarna. Top comment, with 38,000 likes: “this is fine.”
Affirm is reportedly developing a competing product that will finance only the interest portion of a federal student loan payment, on the theory that this represents a more disciplined approach to lending. Industry analysts expect the offering to launch in time for the holiday shopping season, when American consumers will once again be asked to split a $42 sweater into four payments of $11.