Government Agency Calls on Congress to Act on Campus Debit Cards That Could Harm Students Financially
ByA government agency has requested that Congress make it a requirement for banks to disclose how much they pay colleges to offer special campus debit cards exclusively for students.
According to the Huffington Post, the Government Accountability Office (GAO) released a report Thursday that found campus debit cards to hurt students while favoring colleges. For example, the bank pays the school a lot of money to be present on campus and then offers students cards with high fees.
11 percent of the nation's colleges and universities have a campus debit card for student aid and other forms of payment to be loaded onto. Mostly used at public institutions, about a third of the schools that offer these cards use student IDs to also double as a debit card.
"Schools can appear to implicitly or explicitly endorse their college cards, by virtue of the relationship with the provider and co-branding of the card," read the GAO report. "Many students trust their schools and, as a result, may view co-branding as an endorsement and an indication their school has negotiated the best terms for them."
Fees include inactivity charges or a transfer fee for moving a student loan refund from a campus debit account to a different bank account. Various companies could not or chose not to disclose how much the average student accumulated in fees, but some have complained of totals around $1,000.
The GAO reported "two large providers charged a fee for card purchases using a personal identification number (PIN) rather than a signature - a fee mainstream debit cards typically do not charge."
Certain schools have previously disclosed to the HP that they receive anywhere from $25,000 to $1 million annually. They also said that money from financial companies is spent by increasing scholarships and other student services.
Since the Consumer Financial Protection Bureau (CFPB) found Ohio State University to have made $25 million in an agreement with Huntington National Bank, the agency has made a similar recommendation as the GAO. Huntington Bank paid to license the school's logo and turn student IDs into debit cards associated with checking accounts, but the CFPB requested individual schools should disclose the money they make from these deals.
"In doing so, they also want to make sure students know that they have a financial relationship with their school," Rohit Chopra, CFPB assistant director, wrote Wednesday in a report. "Responsible financial institutions also want students to know they don't have to choose their product if they don't want to."