Skip to: Content
Skip to: Site Navigation
Skip to: Search


Financial aid on a debit card? Students hit with extra fees.

Financial aid can be cheaper to administer when colleges hand it off to debit card companies. But a new study finds students are getting hit with hefty fees.

By Daniel WagnerAP Business Writer / May 30, 2012

Graduates sit waiting for the commencement exercises to begin during the Florida State University - Panama City graduation in Panama City, Fla., last month. Florida State is one of hundreds of colleges that have contracts with debit-card companies. Some schools deliver financial aid through debit cards.

Andrew P Johnson/The News Herald/AP/File

Enlarge

WASHINGTON

It took Mario Parker-Milligan less than a semester to decide that he was paying too many fees to Higher One, the company hired by his college to pay out students' financial aid on debit cards.

Skip to next paragraph

Four years after he opted out, his classmates still face more than a dozen fees — for replacement cards, for using the cards as all-purpose debit cards, for using an ATM other than the two on-campus kiosks owned by Higher One.

"They sold it as a faster, cheaper way for the college to get students their money," said Parker-Milligan, 23, student body president at Lane Community College in Eugene, Ore. "It may be cheaper for the college, but it's not cheaper for the students."

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.

Among the fees charged by Higher One, according to its website, is a $50 "lack of documentation fee" for students who fail to submit certain paperwork. The U.S. Department of Education called the charging of such fees "unallowable" in guidance to financial aid officers issued last month.

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.

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.

Higher One has agreements with 520 campuses that enroll more than 4.3 million students, about one-fifth of the students enrolled in college nationwide, according to public filings and the U.S. PIRG report. Wells Fargo and US Bank combined have deals with schools that enroll 3.7 million, the report says.

Lane Community College's president, Mary Spilde, said in an interview that the real problem is a "lack of adequate public funding," which forces students to seek financial aid and colleges to find ways to cut costs.

"Many institutions are looking at ways to streamline and to do things that we're good at, which is education and learning, and not banking," Spilde said.

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.

In the end, students feel locked into accounts before they have a chance to shop for a better deal, Parker-Milligan said.

Read Comments

View reader comments | Comment on this story

  • Weekly review of global news and ideas
  • Balanced, insightful and trustworthy
  • Subscribe in print or digital

Special Offer

 

Doing Good

 

What happens when ordinary people decide to pay it forward? Extraordinary change...

Danny Bent poses at the starting line of the Boston Marathon in Hopkinton, Mass.

After the Boston Marathon bombings, Danny Bent took on a cross-country challenge

The athlete-adventurer co-founded a relay run called One Run for Boston that started in Los Angeles and ended at the marathon finish line to raise funds for victims.

 
 
Become a fan! Follow us! Google+ YouTube See our feeds!