Student Loan Refund Debit Cards Laden With Hidden Fees

A City College of Chicago program that gives student-loan refunds the form of pre-paid debt cards is drawing heat due to its bevy of hidden fees.

Instead of giving refunds as paper checks, the school switched to the debit cards to as a way to deal with fraud and stolen checks. But the cards are little thieves themselves.

There’s a $2 fee for withdrawals, even from Chase’s own ATMs. Talking to a teller costs $10. Checking the account balance incurs a $1.25 fee. None of these fees apply to regular Chase customers.

There is an option to get direct-deposit, but students complain it wasn’t mentioned at sign-up time. “It was, this is the process, this is how you guys have to get your money,” Gerald Johnson, the president of Kennedy-King’s student government association, told the Chi-Town Daily News.

It’s becoming increasingly popular for institutions to opt for loaded debit cards over paper checks, but as this case shows, they often have crazy fees attached to them. If you’re in a situation where you’re being told you need to take a pre-loaded debit card in place of a check, ask if there’s a direct-deposit option so you can avoid unnecessary fees.

Controversial Chase student loan program enrolls 6,300 [Chi-Town Daily News via Chronicle] (Thanks to Joshua!) (Photo: Donncha @ InPhotos.org)

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  1. groove66 says:

    Ha ha! I love that image!

  2. weakdome says:

    ha… AFLAC!

  3. Ariella Kadosh says:

    “Student Loan Refund” sounds like an oxymoron to me. Does that mean that thses kids potentially took out too much in loans?

    • Liam Kinkaid says:

      @Ariella Kadosh: Student loans can also include some living expenses while you’re attending school. It’s much better to borrow this money at 5% student loan rates than using credit cards to live off of. Additionally, subsidized student loans don’t accrue interest while you’re attending, so at that point it’s an interest free loan.

    • ohiomensch says:

      @Ariella Kadosh: Many students take bigger loans to pay living expenses that are not covered in tuition, you know, like buying food, paying rent, buying course books which can cost up to $600 or more PER Semester/Quarter. Not everyone gets a free ride from their parents, and depending on the major, may need to scale back working hours so that they can study and actually pass a class or two.

      • Kelly McCarthy says:

        @ohiomensch: Buying beer, paying drug dealers, buying designer clothes which can cost up to $600 or more PER Semester/Quarter.

        At least that’s what the kids I knew did with their student loan $$

    • joshua70448 says:

      @Ariella Kadosh: My wife didn’t take out any loans at all this semester, but we still got a hefty refund from the school, because she had a ton of grants and scholarships. Granted, it’s not exactly a “student loan” refund, but at this school they’re all rolled into the same student account, so it’s all coming from the same place.

    • god_forbids says:

      @Ariella Kadosh: Let me tell ya:

      1. Pay off tuition/books in advance with 5% back / good rewards card.
      2. Student loan applies to balance of 0$, check / direct deposit issued.
      3. Profit!!! (or fly, stay @ hotel, etc. with rewards)

  4. Verucalise (Est.February2008) says:

    My NYS child support debit mastercard is also the same, no matter what ATM you use, they still charge 90 cents to use it (even the 2 banks they advertise you can get your money for free!) and fees for checking balances and such…

    I’ve tried to switch to direct deposit for 5 MONTHS and they keep sending back the paperwork. I didn’t have the option of direct deposit in the beginning, but now that I can, they are making it impossible.

  5. rpm773 says:

    I’m not giving Chase a pass here, but how long before we find out that not all of the money winds up staying in Chase’s coffers? We’re talking about Chicago, after all.

  6. calquist says:

    Oh man, this is more of a scam than what USBank is pulling at my university.

  7. whereismyrobot says:

    The Univeristy of North Texas just went to this system. They charge you .50 every time you use the card. They make it very difficult for you to avoid using the card.

    • Anonymous says:

      @whereismyrobot:
      If it is a HigherOne card… you are absolutely wrong. If you swipe the card and sign, there is no charge. If your transaction involves using your PIN, then it’s .50
      Read the info you received in the mail and that’s on the website.

      • whereismyrobot says:

        @ShantiImbibery: No, I am not “absolutely wrong. They have charged me when I have signed or used a PIN. Thank you for getting your facts “absolutely wrong,” though.

  8. Liam Kinkaid says:

    University of Houston does the same thing with their CougarOne card. 50 cents for a PIN based transaction, $2.00 non-network ATM fee (there were only 2 “network” ATMs available, so on refund day they got emptied out), $19 inactivity fee, etc. Or you can have a paper check mailed to you that takes 1-2 weeks longer.

  9. larrymac808 says:

    I sort of want to correct the text that says “debt cards” but looking at that list of fees, I think that’s a better term than “debit card”.

  10. windycity says:

    Christine Holevas, a spokeswoman for Chase, was unable to explain why the fees are so high.

    “I can’t answer this question, I just don’t know,” she says.

    That’s because the real answer is “Because we can”. At which point you stick your tongue out and place your thumbs in your ears with your remaining four fingers waggling obnoxiously at the poor sap with the debit card.

  11. LochBox says:

    The University of Central Oklahoma just went to this system this semester. However, they were nice enough to include instructions on how to opt out. I didn’t think twice about it.

    I think it is just another way to get debit/credit cards to students without using the free t-shirt scam.

  12. freelunch says:

    I have a friend at Texas Tech Medical School that received her refund on a debit card with some major fees associated. To get the full amount deposited into a bank account, students were required to complete balance transfer request form (after receiving the debit cards), and informed that processing would take 8-10 business days… they were never provided the option to direct deposit the amount prior to that.

    I am guesing the university is getting a nice kickback from these activities.

  13. GreatWhiteNorth says:

    So what is the kickback to the college in a scam like this? Enough to cover the bad press they are going to get when little 17 year old Janie, still a minor, takes them to court for running a scam to steal her money? They should be advocates for the fair treatment of students.

    Good GOD when did screwing people out of their money become not just an annoyance, but a requirement. When did these colleges become part of the cable television and cell phone alliance of “screw your clients first” companies?

    Crooked bloody schools!

    — end of rant here —

    • nighttrain2007 says:

      @GreatWhiteNorth: Excuse me? Steal HER money? It’s student LOAN refund money, not HER money at all. If these are public funds, I want to know why I’m paying to send little Janie to school in the first place. Little Janie needs to get a job and pay her own way.

      As for Chase, they see it as nothing but an opportunity to take loan funds as well. They are not in the right and should be taken to task for it. But as for LOAN refund money, it should be returned to the loaner and not ‘little Janie’

  14. 1stMarDiv says:

    What? People like to screw over college students? I had no idea…maybe that’s why they print “new edition” textbooks with the same crap in them every year, and then expect you to shell out $400+ for books.

  15. Xerloq says:

    Wal-Mart offers money orders for $0.25. Last time I received a “refund” debit card, I took a quarter and bought a money order for the entire balance of the card, then cashed the money order at my bank. Done.

  16. Trencher93 says:

    Loan refund = money to buy books? Is this a “refund” or just a cash advance for non-tuition supplies? (That’s the way my grants worked back in the day, we’d get a check each year for books etc.)

    Makes sense for a big bank to squeeze a little more blood out of the turnip. The fees make the effective interest rate of the loan higher.

    • Brunette Bookworm says:

      @Trencher93: It’s a “refund” of the money that is over the tuition amount, generally. You get the refund and use it to pay for books and other expenses. At least that’s how it works for me with my student loan. I have the refund direct deposited into my account and then go buy the (overpriced) books with the money left…hoping it covers all of them.

  17. Brunette Bookworm says:

    @Ariella Kadosh: No exactly, you can’t always have the bookstore connected to the bursar’s office so you have to wait for you refund from the school, then use that to go get books and pay other expenses for school. It’s kind of a pain.

  18. vastrightwing says:

    “Education” is a scam when you look at the high tuition, incidental costs such as text books and lab fees, board, food, and many other fees. The educational quality goes down proportional to the cost of it going up. Of course, you can look at it as an “education” being in the system that is scamming you and how to avoid it.

    • darkryd says:

      @vastrightwing: Let’s be fair here – these things cost money. If Education doesn’t charge fees, they dont have income to operate. if they dont have income to operate, they dont’ get to educate.

      I agree the fees are vastly more expansive than they really should be, but let’s not pretend that the world would actually function without re-cooping operating costs.

      • jamar0303 says:

        @darkryd: Some other countries manage to do it for tuitions in the low 4 digits (when changed back to US$). Why does the US have to be so expensive?

        • pecan 3.14159265 says:

          @jamar0303: What other countries? Do they have communist governments? What’s the type of education? What are the chances that once you get out, you’ll be able to find a job in country other than yours?

    • pecan 3.14159265 says:

      @vastrightwing: Did YOU get an education? If you don’t think education is worth it, and is all a scam, either you’re getting by just fine without one, or you’re getting by just fine right now precisely because you got an education.

  19. jbl-az says:

    The state of Arizona used debit cards as the standard method of paying out unemployment insurance. The cards were handled by Chase or an affiliate.

    In this case, I’m happy to say, the cards were free to use at any Chase bank or ATM, at the supermarket or other stores which took ATMs, and I paid no fees, with the exception that if I used it at a non-Chase ATM there was usually a couple-bucks fee that any non-incumbent ATM card would have incurred.

    So poo on the colleges that allowed such a sucky agreement to be put in place.

  20. Abraham Carmona says:

    I actually atted one of the city colleges of chicago. The cards are for student refunds who have left over federal financial aid. They did tell us last semmester about direct deposit and the prepaid cards. So the people complaining about this must be pretty dumb cause they have signs all over the schools and they also sent out emails relating to the refund.

  21. veronykah says:

    I have a job that gave us these as their way of paying us.
    Either you could have your check deposited into your bank account or put onto the “debit” card.
    You could make one withdrawal free, then you’d have to pay for all subsequent withdrawals.
    I opted for direct deposit.

  22. LiC says:

    Portland State University does this with the PSU One card.

    You don’t have to pay to talk to a teller because there are no tellers. It’s an internet bank.

    You’re charged a fee if you swipe your card and enter your pin number instead of signing.

    There are only 3 Higher One ATMs in Portland – and the one in the student center on campus is always out of money.

    The student newspaper had a feature on this system a week or two back – it made me feel all warm inside, huzzah I wasn’t the only one – and it turns out the system was implemented by administration without student input. They’re trying to revise the system now, but it’s a lot of whining about how it’ll take more time to get students their money.

  23. synergy says:

    I guess I can speak from the vantage of being older and wiser, but why didn’t these college students ask if there were any other options. If they were told no, then these employees would’ve been lying and they could be gotten on that.

  24. kwsventures says:

    Getting burned by a debit card is part of your education. Now, did you learn your lesson?