According to a new report by NJPIRG Law & Policy Center, banks and financial firms have partnered up with hundreds of campuses nationwide, latching their debit cards and other products onto student IDs. The report said over nine million students are at risk for increased debt, as the student debit cards come with high fees and weak consumer protections. Meanwhile, the cards have become a prime source for distribution of financial aid to students.
For decades, students would receive their aid by check, without being charged any fees to access the aid.
“Campus debit cards are wolves in sheep’s clothing,” said NJPIRG Advocate Jen Kim. “Students think they can access their dollars freely, but instead, their aid is eaten up by bank fees.”
With the debit-linked cards, students can end up paying hefty fees on their student aid, including per-swipe, inactivity, ATM and overdraft charges. Many students have chosen the card disbursement method because it’s a quicker way to receive the aid.
Kim continued, “Every penny of financial aid money should go to educational expenses, not an education in high bank fees.”
Just as consumers, Kim said, students should always have the opportunity to choose which banks they deal with, and how their financial aid should be disbursed.
“As more and more schools are signing contracts with banks, more and more students are not actually getting a choice,” Kim said.
Of the 7,300 campuses participating in the federal financial aid program, almost 900 have a banking partnership. More than 700 use the cards to distribute financial aid.
The biggest firm in the business, Higher One, makes 80% of its revenues through fees from aid disbursement cards.
The report included recommendations to colleges and policy makers, such as taking steps to ensure students are not charged to access financial aid.
Kim said the practice is not occurring at New Jersey institutions, but it is happening at nearby schools.
“If any schools in New Jersey do explore these bank partnerships, make sure that whatever cards they use have good consumer protections for students,” Kim advised.