As students head back to school and start to receive their student aid disbursements, U.S. Rep. George Miller (D-Calif.), the senior Democrat on the House Committee on Education and the Workforce, highlighted the need for students to be more informed about the fees they may encounter on their school issued debit cards on. Miller also underscored the need for financial institutions to be more transparent in marketing their services to students and provide students with reasonable access to fee-free ATMs.
Miller also applauded the announcement today by the federal Consumer Financial Protection Bureau (CFPB) that it is launching an inquiry into the impact of campus financial products marketed to students by colleges to determine whether these arrangements are in the students' best interest. Campus financial products include school issued debit cards that are used to access a student's financial aid and school- affiliated bank accounts.
In June, Miller and Senator Dick Durbin (D-Ill.) asked the Bureau to examine campus financial products after hearing troubling accounts of potentially bad deals that target college students.
"As a result of the federal inquiry announced today, families in Contra Costa County and throughout the Bay Area have an opportunity right now to share their experiences if they think they have been overcharged while using college or university-based financial products like debit cards," said Miller. "This step by the Consumer Financial Protection Bureau to investigate these financial products, which I had asked for, is very important, and the Bureau is asking for your assistance as it looks into this matter."
According to the New York Times, "the bureau said it is seeking information from students, colleges and banks on what information colleges share with banks when they enter such agreements; how accounts and cards are marketed to students; what fees students are charged; and how students use the cards and accounts in their day-to-day lives." Comments will be accepted until March 18 at the Bureau's website: http://www.consumerfinance.gov/students/whats-the-deal/request-for-information-regarding-financial-products-marketed-to-students-enrolled-in-institutions-of-higher-education/
In addition, Miller said there need to be more fee-free ATM's on campus. A recent analysis done by Miller's staff indicates that in California alone, nearly 800,000 students who may use debit cards to receive their financial aid or student loan money have access to only one fee-free ATM per campus location on average. Furthermore, students at 21 locations in that particular state appear to not have access to any fee-free ATM on campus.
"Access to fee-free ATMs no matter where you live or what time you need to access your aid remains an important concern," said Miller. "Too many students have been slammed with hidden fees and penalties that cut into their already limited financial aid dollars. And if students don't pay close attention, they can find precious aid dollars wasted on debit-card fees."
Miller and Durbin, in a joint statement earlier today, said that they "asked the Consumer Financial Protection Bureau to examine campus financial products after hearing troubling accounts of potentially bad deals that target college students. We are pleased to see the Bureau announce major steps forward today to investigate potential problems with these financial products that may leave students deeper in debt. At a time when student debt has surpassed all credit card debt and topped $1 trillion, schools that enter any deals with financial institutions must do everything in their power to ensure those institutions are not taking unfair advantage of the captive student market. We hope this inquiry will help students, families, schools, and policymakers determine how best to protect student financial aid from unnecessary nickel-and-diming.
"While well-crafted deals for aid disbursement could be a benefit to students, big banks have a long track record of targeting colleges as gatekeepers to young consumers," they said. "Congress has already taken action a number of times to ensure students are protected. In the past few years, we have worked to pass the Student Loan Sunshine Act and the CARD Act to ensure students and families will encounter a more trust-worthy student aid system and ban certain types of predatory marketing toward students. This inquiry, as well as other work we've undertaken to examine fees associated with student aid debit cards, should help us determine what further protections for students are needed."
As school budgets have shrunk, institutions of higher education are increasingly turning to debit cards, typically under contract with a financial institution like Higher One or Sally Mae, to distribute federal student aid to students. A report from the U.S. Public Interest Research Group (U.S. PIRG) Education Fund, found that more than 9 million students across the country are at risk of being nickel-and-dimed to death with fees because their debit cards may come with high user fees, hidden transaction costs and insufficient consumer protections -- adding to the mountain of debt many higher-education students must take on. CFPB's announcement today is a first step to addressing Miller and Durbin's concerns.