Posted by Charleston Voice, 06.01.12
Friday, June 01, 2012
Friday, June 01, 2012
With
the transition from checks to debit cards for disbursing college
student aid, financial institutions have found a new way to make money
that at the same time has increased debt risks for young people.
Today some universities arrange for students to receive their
student loans and other assistance through debit cards issued by banks
partnering with universities. Other universities sell credit card
companies the exclusive right to market their products on campus. These
financial firms provide the cards in exchange for the right to charge a
multitude of fees, such as per-swipe, inactivity and overdraft fees.
“Financial institutions aggressively market or default students
into their bank accounts to maximize these fees,” according to the U.S.
Public Interest Research Group, which issued a new report (The Campus Debit Card Trap).
According to the consumer protection group, “students are at risk
for increased educational debt, due to bank-affiliated campus debit
cards that come with high fees, insufficient consumer protections, and
few options.”
Nearly 900 universities have partnered with banks, including the
University of Florida, University of Michigan, University of
Pennsylvania and Northwestern.
Some financial firms offering the debit cards rely almost
exclusively on this business. Higher One earns 80% of its revenues from
the cards while working with 520 colleges that enroll 4.3 million
students. Among the banks, the most active in this field are US Bank
with card agreements at 52 campuses with enrollment of 1.7 million and
Wells Fargo at 43 campuses with enrollment of more than 2 million
students.
“Campus debit cards are wolves in sheep’s clothing,” said Rich
Williams, U.S. PIRG Higher Education Advocate and report co-author.
“Students think they can access their dollars freely, but instead their
aid is being eaten up in fees.”
-Noel Brinkerhoff
To Learn More:
The Campus Debit Card Trap: Are Bank Partnerships Fair To Students? (U.S. PIRG Education Fund) by Rich Williams and Edmund Mierzwinski, U.S. PIRG) (pdf)
On Campus, New Deals With Banks (by Andrew Martin, New York Times)
Banks Quietly Adding New Fees (by Noel Brinkerhoff, AllGov)
