The newest debit card to be put into critics’ spotlight are those designed to allow students to access financial aid funds. Often used for dual duty as ID cards, colleges love them because they move an inefficient distribution process out of their offices and into financial institutions. Students gain easier and arguably more secure access to their money, but the problem is that all this value comes at a price that ultimately the student pays. These cards often fall into the prepaid card category, which is in the cross-hairs of the CFPB – look for new rules that limit fees, require clear/complete disclosures, and probably require at least one free ATM withdrawal per month.
From a New York Times article:
Federal financial aid is sent directly to colleges, which take the payments due and disburse the remainder to students. But now, many colleges have hired outside financial institutions to perform those functions and encourage students to keep their money with those institutions. As a result, banks and financial firms have “an unprecedented opportunity to market add-on products — bank accounts, A.T.M./debit cards and even loans and credit cards — to students with virtually no competition,” the report said. Students may also be charged automated teller machine fees to access their financial aid funds.
Click here to read more from the New York Times.