Going to college comes with a new set of responsibilities for students, and one of those responsibilities is being in charge of their own finances. What better way to impart a lesson in finances than giving them access to federal student aid on a prepaid debit card? As the use of such cards is growing in popularity at universities and colleges, advocates are calling for more oversight to their use.

As of July 2013, at least 11% of U.S. colleges and universities, about 852 schools, had agreements to provide debit or prepaid card services to students. Many of those schools issue federal student aid and tuition on the cards, the U.S. Government Accountability Office reports.

While the cards provide a convenient way for schools and universities to outsource the process of paying financial aid and other funds, the fees and accessibility for students is an area of concern.

The GAO found that fees charged by college card providers were similar to fees incurred by bank-issued debit cards. However, two of the largest card providers charged fees for PIN purchases.

Schools interviewed by the GAO said they had not received reports of issues conceding the availability of fee-free ATMs on campus. The GAO found the Department of Education’s broad definition of convenient access could make avoiding unnecessary fees difficult for students when making withdrawals.

In 2012, the nation’s largest provider of the cards, Higher One, came under fire after students reported being stuck with high ATM fees because the company did not offer convenient access.

The GAO report found several instances in which schools or card providers encouraged students to enroll in a college card without showcasing neutral information about payment options.

The GAO recommends requiring financial firms providing debit and prepaid card services to colleges to file their agreements for public review.

Additionally, the Department of Education should better specify what constitutes convenient access to ATMs or bank branch offices for students receiving financial aid funds, as well as develop requirement for schools and card providers to present neutral information to students about their options in receiving federal aid.

Both the Department of Education and Bureau of Consumer Financial Protection agreed with the GAO, the report says.

This isn’t the first time the use of prepaid debit cards on college campuses has come under scrutiny. In January 2013, the Consumer Financial Protection Bureau launched an inquiry into the impact of financial products marketed to college students through their schools.

Actions Needed to Address ATM Access, Student Choice, and Transparency [U.S. Government Accountability Office]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.