Cash-strapped colleges are partnering with banks to transform student IDs into debit cards. The deals are a windfall for the institutions, but force students to open accounts laden with hefty penalty fees and surcharges.
Angry anti-corporate long-haired hippie Ryan Klute had this to say of the arrangements:
“I’m not an angry long-haired hippie against corporations, but it’s a bad idea when the university and the company have a vested interest in you spending your money so they can make money off you.”
The schools benefit from the exclusive agreements whenever students swipe the cards. They also receive annual payoffs that can reach $1 million. The banks cash-in when students like Brad Vehafric, a Portland State junior, accidently overcharge their account and get hit with $150 in fees for buying a cup of coffee.
In 2007, 127 schools had joined with banks to issue ID cards that double as debit cards, a 144% jump from 2002, according to CR80News, an industry publication.
A USA TODAY survey of the nation’s 15 largest universities by enrollment reveals that more than half now have bank card relationships with financial institutions. In most cases, that means the student ID card doubles as a debit card.
“If the big universities are doing it, then it’s likely the small ones will follow,” says Margaret Reed, an associate accounting professor at the University of Cincinnati. “If I were a student, I wouldn’t be happy” that colleges are pushing a product that earns them money.
Students shouldn’t assume the bank account and debit card promoted by the university will be a good deal for them, says Greg McBride, a senior financial analyst at Bankrate.com.
“In life, you’re going to pay for convenience,” McBride says. “If the goal is to get the most out of your money, it pays to shop around.”
Students should stay away from anyone hocking freebies or offering curiously convenient deals. Instead, find a credit card with a low APR and ideally, rewards, and pay it off in full every single month.
Colleges’ debit-card deals draw scrutiny [USA Today]
(Photo: Getty)
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I had to pay $X every semester for a meal plan living on campus, a portion of which was just in an account for extra cash… forced to put it there. They also kept pushing for more money to be put on your account every damn time tuition was billed etc. etc. warning parents of the hazards of being low on money, and carrying cash.
By the time I was done with college, I broke $1k. I think I spent $5 one time. The bursar’s office had to review my account before they could pay out when I was graduating.
I know many who were foolish enough to spend it as if it were to rot if it was just left.
With me they earned some interest on the cash over 4 years. With many they earned an extra $1k+ because people didn’t feel it.
Not sure how turning Student ID’s into Debit cards with banks is different from schools handling it on their own. Both are about deception and making a buck.
“Forced”????? Do they hold a gun to your head? Do they put you in thumbscrews? Do they kidnap your pet gerbil and hold it for ransom? Ummmmmm ….. NO! You are NOT forced to do this. If you are dumb enough to do it without understanding what it does, how it works, and what the benefits and pitfalls are you deserve what you get. ENOUGH of the victim mentality. There are choices and consequences – you make the choices and YOU enjoy/suffer the consequences.
JEEZ!
Pat
This country really needs more debt riddled young people.
@oakie: lOVE IT!
My school did that when I got there in ’02. I didn’t think anything of it. It had two magnetic strips on the back. One was for access to buildings, the other for debit transactions.
It was no more or less secure than any other debit card out there. I used a handful of times, but I didn’t like the bank that sponsored it (Wells Fargo), and I got legit and got a real credit card after an embarrassing incident where both of my debt cards got declined trying to buy $4 at Sonic. Anyways, credit cards were a lifesaver in college. Never once have I ever paid a late/debt/random fee and am otherwise a great deadbeat customer to the CC companies.
@ElizabethD: So, in the example of my grad school, 5% of $4,746,000,000 is about $237,300,000–and they still pester me for money 4x/year, and they don’t give full scholarships to people who can obtain financial aid.
If Eliot Spitzer could smuggle a few grand to his, um, tutor, I’m sure Washington University in St Louis (and a few others) could scrape together virtually free tuition for a large number of students. In no way–not in facilities, resources, or even in the cafeteria–was this insane amount of money reflected in my education.
@Eyebrows McGee: You make excellent points, especially about the countercyclical nature of community-college funding. I suppose I should have thought for a moment about public institutions, although I still suspect at least some of them too have considerable endowments hidden in the cellar, only permitted to be spent on highly specific things (sports).
@ChuckECheese: Some public universities certainly do. But for the most part, the luxury of ginormo endowments is limited to a couple dozen very well-known schools (public and private both).
But it’s typically the flagship state Us that have the big money, and that’s where the sons and daughters of the upper middle class who can afford college anyway end up. The secondary state-system schools are typically chronically underfunded, and serving categories of students who have to work much harder to make tuition. And it’s self-reinforcing, since people who donate to schools (lawyers, doctors, barons of industry) tend to come out of these “name” schools and donate to them … not so many millionaires donating to Local Community College or Small State U.
Oh well. I guess it’s a pretty screwed up system generally. One of my profs at Notre Dame used to rant that if Jesus turned up tomorrow, he wouldn’t be saying, “How’s your endowment doing?” but “Why in the name of ME aren’t you educating more poor people with all that cash?”
(And woohoo, go Bears!)
My community college does this. My student ID is a MasterCard debit card. Laaaame….
I’ve worked in student accounts & financial aid for over 15 years. There are very specific regulations related to issuing refunds of federal aid funds (aka Title IV) to students via cards. To see the regs in a (somewhat) readable form check page 12 (or 4-32) of the pdf here: [ifap.ed.gov]
In summary:
- Schools can’t force students to use the card option to receive their aid refund.
- The balance of the card must be able to be accessed as cash.
- Fees may be charged, but only under certain conditions (such as the student opting to use an ATM other than the one associated with the card, however an ATM from the bank on the card is expected to be nearby)
- The cards should be free when issued.
- Funds must be FDIC insured.
- Schools may not draw back funds previously transferred to the card without written permission from the student (unless to correct an error in the transfer of the funds).
- The card may not be a charge card, nor may it be converted to a charge card after it is issued. It may also not be linked to a checking or savings account. It is meant to be stored value ONLY (like a gift card).
- Access to the card cannot be contingent upon the student’s enrollment or other affiliation with then school.
Ultimately the school is responsible for making sure that these arrangements comply with federal regulations. If your school isn’t following these guidelines point this information out to the school’s Director of Financial Aid. If that doesn’t work, contact the Department of Education and file a complaint.
@bravo369: At the school i went to you weren’t “forced” you just had to specifically call/mail them to decline it or you automatically got set up for it. Of course, you only found this out if you read every minute detail in the gobs of information they gave you. A lot of people didn’t pay attention to a lot of stuff since the college was essentially blasting out the fact that you had to get this card, it was just like your old one, no worries, and if you didn’t get it you were screwed.