WASHINGTON – May 30 – Over 9 million 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. Financial institutions now have affinity partnerships with almost 900 campuses nationwide, grafting bank products onto student IDs and other campus cards to become the primary recipient of billions in federal financial aid to distribute to students.
“Campus debit cards are wolves in sheep’s clothing,” observed 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.”
The Campus Debit Card Trap, a new report released by the U.S. Public Interest Research Group Education Fund, finds that banks and financial firms now control or influence federal financial aid disbursement to over 9 million students by linking checking accounts and prepaid debit cards to student IDs. For decades, students would receive their aid by check, without being charged any fees to access their student aid. Now, students end up paying big fees on their student aid, including per-swipe fees of $0.50, inactivity fees of $10 or more after 6 months, overdraft fees of up to $38 and plenty more. Financial institutions aggressively market or default students into their bank accounts to maximize these fees.
A well-structured debit card program can provide benefits to students, but many current programs provide little to no choice, while high fees on grant and loan money leave students in deeper debt.
“Every penny of financial aid money should go to educational expenses, not an education in high bank fees,” said Williams.
Additional findings from the report include: