We just released a report, The Campus Debit Card Trap: Are Bank Partnerships Fair To Students, that shows banks skim millions in fees from student aid using debit-card-linked student IDs.
“Campus debit cards are wolves in sheep’s clothing,” observed Rich Williams, The Student PIRGs 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.”
“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.” For more on the report check out check out this article from NBC News and download the report.
The report 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.