With the cost of higher education rising so fast that some Americans are being priced out of college, it is unconscionable that some unscrupulous financial firms have found yet another way to empty the pockets of students and their families.
A report by the U.S. Public Interest Research Group Education Fund details how some companies, with the cooperation of colleges, have lured millions of students into taking on even more debt.
And it’s being done in a manner promoted as a convenience for students and a cash savings for the institutions of higher education that take advantage of outsourcing certain services. But it’s the banks and other financial firms making the big money while driving students and their families further into debt that makes this so bad.
Some banks and other financial firms are taking advantage of a variety of opportunities to form partnerships with colleges and universities to produce campus student ID cards and to offer student aid disbursements on debit or prepaid cards.
The colleges and universities participating don’t have to do the work in-house, and students who grew up with modern conveniences and unaccustomed to old-fashioned methods such as snail mail see no problem using their campus student ID cards as debit cards. Problem is, students end up paying fees all over the place – per-swipe fees, inactivity fees, overdraft fees and on and on.
And then there are the aggressive marketing strategies aimed at students, and the weaker consumer protections on certain cards that hold student aid funds. A student staring at a card that has the college mascot on it may get the mistaken impression that the college endorses the provider. It’s an honest mistake by the student, thanks to slick marketing by the card issuer.
The Education Fund report identified nearly 900 card partnerships between colleges and banks or other financial firms at schools with more than 9 million students, or more than 2 in 5 (42 percent) of all students nationwide.
The fund found that 32 of the 50 largest public four-year universities, 26 of the largest 50 community colleges and six of the largest 20 private nonprofit schools had debit or prepaid card contracts with a bank or a financial firm.
The big players: US Bank, with the most card agreements at 52 campuses with more than 1.7 million students; Wells Fargo, with card agreements at schools with the greatest number of students; and the largest player, Higher One, with card agreements on 520 campuses that enroll more than 4.2 million students.
The report did not list any local institutions as having such connections.
The report recommends best practices that would reduce the cost to students, including: eliminating fees for financial aid disbursement, increased transparency and tracking, and enforcing current regulations by monitoring key players in the marketplace. This work could be done by the Consumer Financial Protection Bureau, other bank regulators or the Department of Education.
Students who open themselves up these pervasive fees are unwittingly burying themselves deeper in the trillion-dollar debt hole that has become synonymous with American higher education. Schools have to stop throwing more dirt on their students’ financial worries.