Colleges flunking students in debt education

Sep 29, 2013 by

Some universities are giving their students a bad education in finance to foster relationships with banks.

That’s according to a consumer advocate group’s report to be released Monday at a Consumer Financial Protection Board (CFPB) hearing devoted to financial products offered on college campuses.

These schools, in seeking rewards from banks for exclusive debit-card marketing rights on their campuses, are failing in their role as financial gatekeepers.

They should be doing a better job of locking out financial predators who would soak students with high debit-card fees almost as soon as they start using their student IDs and access federal financial aid, according to the report released by the US Public Interest Research Group (US PIRG).

“Banks and other financial firms are taking advantage of a variety of opportunities to form partnerships with colleges and universities to provide campus student ID cards and to offer student aid disbursements on debit or prepaid cards,” writes Rich Williams, a higher-education advocate, in the US PIRG report.

He notes these debit and credit cards, which are often known as affinity cards, impress students because they carry the college insignia.

Even students who don’t want these debit cards, US PIRG officials say, often get them. That’s because these cards are often used when students have received more in student aid than they owe in tuition for a quarter, and the difference is provided through a card.

Colleges often receive bonuses from the card companies for allowing them to be the exclusive provider on a campus.

However, students end up “bearing some costs directly — including per-swipe fees, inactivity fees, overdraft fees and more,” according to the study.

Indeed, the study documents that college-age young people — 18 to 25 — tend to pay the most debit card overdraft fees.

The report called for more federal involvement in the selling of financial products to college students.

But an official of the National Association of College and University Business Officers (NACUBO), in his letter to the CFPB, urged regulators to study the issue and understand that the banking market is complex.

“Different student bodies have varying needs and preferences. For example, our members report that students at community colleges often arrive without existing banking relationships or may even be ineligible to open an account on their own due to pre-existing circumstances. Additionally, CFPB should not assume that all college students are ‘young consumers,’” according to John Walda, president and CEO of NACUBO.

“Student demographics,” he added, “show that traditional students, those 18 to 22 years old, are a declining proportion of college students; those over 24 or financially independent from their parents are fast becoming the majority population of college students.”

via Colleges flunking students in debt education | New York Post.

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