PayPal Discontinuing Student Accounts

For the past seven years, PayPal has offered parents the option of securely sending their college-age kids money for things like rent, activity fees, or other needs through its Student Account program and accompanying Student Debit MasterCard. But that simple money transfer option is ending at the end of this month. 

Consumerist reader David says he received an e-mail notice recently that his student account would be closed effective Sept. 29.

Following that date, parents and students will no longer be able to use their PayPal Student Debit MasterCard and Student Accounts will no longer be able to be used to make purchases in sore or online.

As of Nov. 16, all remaining funds in the accounts will be transferred to the associated parent’s PayPal account, unless withdrawn prior to the closure deadline.

Despite sending customers notice that the accounts would be closed, PayPal’s Student Account webpage is still active, without any disclaimer that the program would be discontinued soon.

Consumerist reached out to PayPal about the decision to discontinue the Student Account programs, and to determine how many accounts are affected by the closure. We’ll update this post when we hear back.

Student Accounts, which launched in August 2009, centered on the use of a special PayPal-branded MasterCard debit card that’s tied to a parent’s PayPal accounts.

Parents acts as the provider and can transfer money to the accounts whenever they want — either through predetermined dates or at the spur of the moment. They can also track when, where, and how much their children spend.

While the system, which aimed to create life-long PayPal users, provided an alternative method for students to get money from their parents, it also came with a plethora of fees and restrictions.

For example, a user agreement for the cards from Aug. 2014, shows each ATM withdrawal incurred a $1.50 fee, while a signature withdrawal cost $3. Accounts were restricted with a $2,000/month spending limit, and a $500 daily spending limit.

Several account users have voiced their disappointment in the program’s discontinuation on PayPal forums, noting that the cards made sending their children needed funds fairly effortless.

Additionally, some users say the accounts allowed their children to flex a bit of financial independence they might not have otherwise experienced.

Still, our colleagues down the hall at Consumers Union say there are other options for parents and their students.

“There are a lot of prepaid cards out there on the market today that have as robust functions as any debit card linked to a traditional bank account – and they may even have fewer account fees,” Suzanne Martindale, staff attorney for CU tells Consumerist, noting that accounts associated with PayPal don’t have guaranteed protections like insured deposit accounts. “Parents can look to many options out there on the market to help manage their children’s spending.”