The bank said it has landed an exclusive contract with the Association of Train Operating Companies (Atoc) to provide the 16-25 Railcard for the next four years.
The card usually costs £30 a year. It will be free and valid for four years to anyone in this age group, in full-time education, who opens a new Santander student account for the first time.
The multi-million pound deal gives Santander exclusive rights over the railcard. The previous provider, NatWest, had held the contract since 2004.
The contract is part of Santander's strategy to grow its current account base, by attracting a substantially increased number of student current account holders who it hopes to hold on to after they have graduated.
The bank has more than one million customers who use its flagship 123 current account, which offers cashback on household direct debits and in-credit interest for a £2 monthly fee. It hopes to see more students moving on to the 123 account after leaving education.
Steve Pateman, head of UK Banking at Santander, said: "We have been working hard on our switching proposition and on convincing customers to switch to Santander from other banks - so much so that 250,000 of them have done so in the last 12 months."
He said the four-year deal represents "a significant step towards our goal of increasing the number of primary banking customers by securing a substantial increase in student account openings".
Santander's student current account is fee-free and offers a variable interest rate of 1% on balances up to £500 as well as features such as online and mobile banking. The bank has 44 branches on university campuses.