Student loan debt is on the rise and recent college graduates are having trouble making loan payments. Some analysts feel that students are biting off more than they can chew, accepting loan after loan without realizing how much money theyre actually borrowing.
A new report has found that some college students are experiencing even more financial aid distress due to college debit cards, which are being used by many schools to disperse financial aid refunds. Any excess money remaining in a students account after tuition and fees are paid was once returned by check, but the practice of giving students pre-paid debit cards is becoming more and more popular.
The U.S. Public Interest Research Group (PIRG) Education Fund reports that up to 900 U.S. colleges and universities have partnerships with credit or debit card companies to put a students financial aid money on debit cards linked to checking accounts or on prepaid cards that can charge excessive fees. One non-bank financial company called Higher One has card agreements with over 500 college campuses alone.
PIRG explains that many schools are turning to financial aid debit cards to cut costs. For example, staff members will no longer have to cut checks and stuff and mail envelopes. The schools also receive kickbacks for utilizing the financial companies cards. A contract between Ohio State and Huntington Bank includes $25 million in payments to the school over the course of 15 years.
Tampa Bay Times columnist Robert Trigaux explains that many students assume these financial aid debit cards are endorsed or approved by their school because they often feature the schools name and logo.
In some instances, the pre-paid debit cards are even linked to student IDsone card that can be used for identification and making purchases. Students are not absolutely required to use the cardsthey can still request financial aid funds via check or direct deposit but they often fail to realize this. Some students agree to take the pre-paid cards because it could take several weeks to receive a paper check or set up a direct deposit.
Fees may be imposed for simply using the card, checking the cards balance, or withdrawing funds from an ATM not associated with the card. Higher One does offer limited ATMs on college campuses, but according to TIME Moneyland the ATMs often run out of cash, forcing students to withdraw their money elsewhere and pay a $5 surcharge.
Cincinatti.com points out that students can also be charged to load additional money onto their cards or when they enter their PIN number to make purchases rather than use the credit option and sign their name on the receipt. Fees can be assessed for a variety of other reasons.
Although colleges and universities may tout financial aid debit cards as convenient, students can wind up getting burned. The financial companies that issue the cards will argue that there are ways around the fees, but its a safe assumption that most busy young adults will not take the time to read small printunfortunately, the same problem that exists with student loan debt.
Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.
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