[Vision2020] Debit Cards on Campus

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

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June 19, 2012
Debit Cards on Campus

Given the history of shady dealings between banks and colleges, Congress
needs to take a hard look at the increasingly common practice of schools
contracting with
banks<http://www.nytimes.com/2012/05/31/business/on-campus-new-deals-with-banks.html>to
disburse financial aid dollars to students.

In 2008, Congress finally barred student lenders from offering schools
kickbacks to steer student business their way. The next year, it required
credit card companies marketing to young people — and often paying schools
or alumni associations for access — to ensure that applicants had the means
to pay before issuing cards.

Debit cards have received less federal oversight. And, according to a
study<http://uspirgedfund.org/reports/usf/campus-debit-card-trap>by
the United States Public Interest Research Group Education Fund, an
advocacy organization, nearly 900 colleges and universities have card
relationships with banks or other financial institutions, some of which
manage student aid disbursements by turning student IDs into debit cards.
Some schools save money by outsourcing administrative costs. Others receive
payments from the banks.

Lawmakers are now pressing for answers about these practices. Citing the
study, Senator Richard Durbin, a Democrat of Illinois, along with Senator
Jack Reed, a Democrat of Rhode Island, and Representative Peter Welch, a
Democrat of Vermont, sent letters to 15 financial
institutions<http://welch.house.gov/images/stories/Letter_to_American_Express_-_June_11_2012.pdf>asking
each to provide information on campus card fees.

Senator Durbin and Representative George Miller, a Democrat of California, have
asked<http://democrats.edworkforce.house.gov/sites/democrats.edworkforce.house.gov/files/documents/112/pdf/letters/PIRG-IG-CordrayLetter.06-07-2012.pdf>the
inspector general of the Department of Education to determine whether
the arrangements hurt students or violate federal regulations. They
criticized the banks for what they described as “aggressive and misleading
marketing” to students and for charging hidden fees that could lead
students to quickly deplete their aid accounts.

The study pointed to some fees charged by the biggest player in the
field, Higher
One <http://www.higherone.com/>, which has contracts with 520 campuses.
Student account holders are charged $29 the first time they overdraw and
$38 after that, 50 cents for making a debit card purchase with a PIN and
$2.50 for using another bank’s A.T.M. to withdraw cash.

According to the study, some students mistakenly believe that they must
keep their aid with the issuing bank. Others, it says, have to wait longer
for funds if they want them disbursed through their own banks.

It says that some of the banking arrangements might well benefit students,
but it decries a lack of transparency in the contracts between colleges and
the banks.

Unfortunately, high banking fees are a fact of life these days for all
consumers. But school administrators should be doing more to protect
students. Before they cut a deal with any bank — for campus access of any
type — lower fees for students should be on the top of their list of
requirements. If the colleges can’t or won’t protect students, the
regulators and Congress will have to, once again, step in.
  ______________________________________

Like campus parking, once banking relations provide an income stream,
college administrations are loath to address much needed reform.

-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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