Yesterday, MPR picked up an Associated Press article, Colleges' bank deals saddle students with big fees which reviewed the finding of The Campus Debit Card Trap, a report issued Wednesday by the US PIRG Education Fund. From the AP article:
As many as 900 colleges are pushing students into using payment cards that carry hefty costs, sometimes even to get to their financial aid money, according to a report to be released Wednesday by a public interest group.
Colleges and banks rake in millions from the fees, often through secretive deals and sometimes in apparent violation of federal law, according to the report, an early copy of which was obtained by The Associated Press.
More than two out of five U.S. higher-education students -- more than 9 million people -- attend schools that have deals with financial companies, says the report, written by the U.S. Public Interest Research Group Higher Education Fund.
The fees add to the mountain of debt many students already take on to get a diploma. U.S. student debt tops $1 trillion, according to the Consumer Financial Protection Bureau.
Student loans have surpassed credit cards as the biggest source of unsecured debt in America, according to the CFPB, which regulates cards and private student lenders.
While the debit cards are optional, students must opt out, in most of the deals inked by colleges and financial institutions.
The AP article cites a TCF arrangement with the University of Minnesota that's related to naming rights to the Gophers' stadium, and the cutline on the photo accompanying the piece reads:
Students walk across the University of Minnesota Twin Cities campus in an October 2011 file photo. As many as 900 colleges -- including the University of Minnesota -- are pushing students into using payment cards that carry hefty costs.
But the flagship school and local bank TCF aren't the only ones with a partnership.
A review by Bluestem Prairie revealed that MCTC, Central Lakes College, Century College, Dakota County Technical College, Hennepin Technical College, Inver Hills Community College, Lake Superior College, North Hennepin Community College, St. Paul College and Metropolitan State all have deals with the debit card company at the center of the report: Higher One.
So what's the problem with the arrangement?
Programs like Higher One's shift the cost of handing out financial aid money from universities, which no longer have to print and mail checks, to fee-paying students, said Rich Williams, the report's lead author.
"For decades, student aid was distributed without fees," Williams said. "Now bank middlemen are making out like bandits using campus cards to siphon off millions of student aid dollars."
Students can opt out of the programs and choose direct deposit or paper checks to receive their college aid, but relatively few do. The cards and accounts are marketed aggressively using college letterhead and websites carrying the endorsement of colleges. Higher One also warns students that it will take extra days if they choose direct deposit or a paper check.
This seems to be accurate. Century College, for example, has posted a FAQ pdf for the Century Choice Card. The headnote reads:
Century College has partnered with Higher One, a financial services company focused solely on higher education, to offer faster delivery of refunds to students. Higher One will help bring this method for receiving refunds via the Century Choice Card Debit MasterCard®. The Century Choice Card will be your key to faster refunds and increased choice for receiving your Financial Aid or school refunds, including the preferred Easy Refunds method. Easy Refund is by far the fastest and easiest way to gain access to your refund money—literally the same day Century College releases it. With this service on the way to
campus, it’s natural that you may have some questions. Below are answers to some of the most frequently asked questions about the all-new Century Choice Card and this new refund process.
It's pretty hard to find much about the cost of the card in the Century Choice Card FAQ or at any of the community and technical colleges' websites. The AP notes a few listed in the USPIRG report:
Among the fees charged to students who open Higher One accounts: $50 if an account is overdrawn for more than 45 days, $10 per month if the student stops using his account for six months, $29 to $38 for overdrawing an account with a recurring bill payment and 50 cents to use a PIN instead of a signature system at a retail store.
Read the entire USPRIG report for details.
What are the details of the arrangements that some MNSCU schools have with HigherOne, and what consumer information about the potential costs are shared with students at participating campuses?
Higher One's founder told the AP that everything is hunky-dory, citing the financial corporation's own report to back up his claim:
Higher One founder and Chief Operating Officer Miles Lasater said in an email that the company takes compliance with the government's rules "very seriously," and officially swears that to the government each year.
"We are committed to providing good value accounts that are designed for college students," he said, and students must review the company's fee list when they sign up for an account. He cited a study commissioned by Higher One that declared Higher One "a low-cost provider for this market." The same study found that the median fees charged to the 2 million students with Higher One accounts totaled $49 annually.
The Century College FAQ stresses "free," rather than $49.
US PIRG's report makes a number of recommendations that the authors believe will strengthen the position of students. They also observe that scrutiny in other areas where government has partly privatized financial services has brought better deals:
Inquiries into the privatization of government benefits through the use of prepaid cards in other sectors, suchas state unemployment benefirts, have suggested that transparency of terms and fees, as well as contracts, leads to governments making better deals, with fewer fees, for their clients.
Hat-tip: Facebook friend Kevin Chavis for posting the AP article and suggesting that MCTC has a deal with Higher One.
Image: The Century Choice Card.