Earlier this year, the growing trend of colleges disbursing financial aid payments to students on debit cards came under fire from consumer advocates and some legislators as it highlighted the too-blurry line between schools and financial institutions. But some students are crying foul over the cards simply because they are a huge pain in the butt if you don’t want to be stuck with ATM fees.

The nation’s largest provider of these debit cards is a company called Higher One. And if students want to avoid having their cash drained by fees, they need to find an ATM that is part of the Higher One network. For one student at San Joaquin Delta College in California that could more than an hour round-trip.

“At least 35 to 40 minutes out of my way, one direction just to get to an ATM,” he tells CBS Sacramento’s Kurtis Ming.

If he doesn’t make that drive, he’ll be hit with a $2.50 for using a non-Higher One ATM, plus another $2 to $3 from whatever bank is operating that ATM.

The U.S. Public Interest Research Group accuses Higher One of using “scare tactics,” and that students are not told they can still opt to get their financial aid via check to then deposit in whatever bank they wish.

“They tell students that if they want their money as soon as it’s available, the only option where they can do that is getting the money in a Higher One debit card,” a U.S. PIRG advocate claims.

In a rather lengthy statement to CBS, Higher One says U.S. PIRG’s “accusations are false… US PIRG is spreading misinformation about our business and has been for months.”

The company says that, per federal guidelines, students have the choice whether or not to receive their funds via paper check, direct deposit or through Higher One. “ALL 3 OPTIONS are always free for the student and they will never be charged to receive their money,” says Higher One, which claims there are no hidden fees associated with their accounts, and that less than 50% of its total revenues come from fees.

When asked by CBS why it charges the ATM fees to students in the first place, Higher One replied:

Have you been following the news? Bank fees are on the rise. Read Forbes, CNN, Time, any outlet. We are constantly keeping our accounts low cost for students. Just because you see a charge on a fee schedule doesn’t mean the accountholder incurs that fee. And if you have it, I’m happy to review the information you have that shows any banks that offer checking accounts for students are absolutely free.

The bottom line is this: If you’re a student considering getting your financial aid on a debit card, you should look at how many in-network ATMs are in the area of your home and campus. You should also compare ATM fees charged by banks in the area because they could be higher than the ones assessed by the debit card company.

Call Kurtis Investigates: Students Upset Over College Debit Card Fees [CBS Local]

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