Student debit or prepaid cards used to distribute tuition reimbursement and facilitate other payments to and for students have been under the microscope by the Consumer Financial Protection Bureau and various states have been piling on.
“Since the late 2000s, most public universities and colleges in Oregon (though not the UO) have had contracts with external firms to distribute financial aid, scholarships and loans to students. The idea was that schools would save money. However, many students now feel that the cost “savings” have actually been a cost “shift” to students who are already in debt.
Mario Parker-Milligan, the Legislative Director of the Oregon Student Association, was a student at Lane Community College when he first discovered what he calls the “predatory” practices of the third-party firms. LCC contracts with Higher One, a Connecticut-based firm that is widely used in Oregon and across the country. Parker-Milligan is now working with legislators to get regulatory laws passed to make sure some of the things he experienced don’t happen to future students.”
Students without bank accounts in particular can benefit from the security, convenience and financial inclusion that these cards offer. Colleges and universities of all types, always under budget constraints, can lower their cost of funds disbursement and improve operational efficiencies. Problems arise when fees aren’t appropriately disclosed and the individuals involved in card sign-up process are not educated properly to appropriately explain the product. Both issues are easily solved.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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