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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