Farmers Insurance Group’s Farmers Financial Solutions subsidiary has struck a sales alliance with First Union Corp.’s Educaid student loan division.

Los Angeles-based Farmers’ 15,000 agents in 29 states can now refer their clients to Educaid, a Sacramento unit of the Charlotte, N.C., banking company, to apply for federally and privately guaranteed loans.

Farmers decided to offer student loans because “we’re a middle-American, middle-market kind of company,” and paying for college is an issue affecting many American families, said Brian S. Cohen, the president of Farmers Financial Solutions. “It was a logical extension.”

Student loans are part of a secondary group of products and services that Farmers agents can choose to sell. Through deals with a host of providers, agents can refer clients for auto loans, auto-buying services, home warranty products, discount travel, and mutual funds.

Insurance agents have strong ties with customers, Mr. Cohen said. Farmers “wants to leverage those relationships,” he said, “not just to increase business but to strengthen the relationships they have with their existing customer base.”

Educaid makes standard loans — those based on the financial needs of students’ families — but also lends under the Federal Parent Loan for Undergraduate Students, or Plus, program, which makes loans available to families at all income levels. Educaid also provides education lines of credit. Both Plus and the credit programs are geared to parents rather than students, but Educaid also offers loans for older and returning students.

“Looking at the Farmers customer base … we thought parents were more likely to be looking for financing,” said Kevin Landgraver, senior vice president of Educaid.

Farmers gets a fee from Educaid for the applications its agents generate, but “I don’t really think the emphasis is on the dollar amount,” Mr. Landgraver said. “The reason we’re working with Farmers is that they’re really trying to expand their value to their consumers.”

He declined to give sales projections for the student loan program.

The Farmers program is unusual. Some insurance agents have begun selling banking products like auto loans and home equity loans, but very few offer student loans.

One financial institution that facilitates insurance-agent sales of student loans is Assurance Partners Bank, the Carmel, Ind., thrift formed by the National Association of Mutual Insurers. But David T. Fronek, president and chief executive officer of Assurance Partners, said student loans are not a rewarding business for insurers.

“So far it’s been a very difficult product to distribute,” he said. Assurance, which opened in June, operates through the Internet and agents in the Indianapolis area.

“The student loan business by and large takes place at the financial aid offices at colleges and universities,” Mr. Fronek said. That is where students go to get forms and apply, not banks or insurance agents, he added.

Mr. Fronek said that in his previous job as a First Chicago NBD Corp. executive, he was responsible for student loans and found them tough to sell then.

And they are troublesome in other ways: “The federal programs are outstanding programs, but there’s a lot of paperwork involved,” Mr. Fronek said. “It’s not a very easy loan to deliver.”

Because the loans have small margins, the referral fees paid to agents are “almost insignificant,” he said.

Assurance Partners works with Sallie Mae to provide loans through agents. But Mr. Fronek said he does not think the loans will be an important revenue source for either the thrift or its agent distribution force, and he declined to say how many had been sold.

Though Mr. Landgraver acknowledged that college financial aid offices are the leading distribution channel for student loans, he said insurance agents are a good alternative for parents and students.

Educaid has no other alliances like the one with Farmers, which was announced last week, but is seeking them, Mr. Landgraver said. He called Educaid’s partnership with Farmers “a classic example” of the type of affinity relationships he wants to develop, but added that student loans could also be sold through other channels, including brokerages.

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