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Colleges push students into using cards laden with fees For disbursing financial aid

It took Mario Parker-Milligan less than a semester to decide that he was paying too many fees to Higher One, the company hired by his college to pay out students' financial aid on debit cards.

Four years after he opted out, his classmates at Lane Community College in Eugene, Ore., still face more than a dozen fees -- for replacement cards, for using the cards as all-purpose debit cards, for using an ATM other than the two on-campus kiosks owned by Higher One.

"They sold it as a faster, cheaper way for the college to get students their money," said Parker-Milligan, 23, student body president. "It may be cheaper for the college, but it's not cheaper for the students."

As many as 900 colleges are pushing students into using payment cards that carry hefty costs, sometimes even to get to their financial aid money, according to a report released today by a public interest group.

Colleges and banks rake in millions from the fees, often through secretive deals and sometimes in apparent violation of federal law, according to the report.

More than two out of five U.S. higher-education students -- more than 9 million -- attend schools that have deals with financial companies, says the report by the U.S. Public Interest Research Group Higher Education Fund.

Under its contract with Huntington Bank, Ohio State University will receive $25 million over 15 years, plus a sweetener of $100 million in loans and investments for the neighborhoods around campus, the report said.

Among the fees charged by Higher One, according to its website, is a $50 "lack of documentation fee" for students who fail to submit certain paperwork. The Education Department called the charging of such fees "unallowable" in guidelines to financial aid officers issued last month.

Higher One founder and Chief Operating Officer Miles Lasater said the company takes compliance with the government's rules "very seriously" and officially swears that to the government each year.

Higher One has agreements with 520 campuses that enroll more than 4.3 million students, about one-fifth of the students enrolled in college nationwide, according to public filings. Wells Fargo and US Bank combined have deals with schools that enroll 3.7 million, the report said.

Programs like Higher One's shift the cost of handing out financial aid money from universities, which no longer have to print and mail checks, to fee-paying students, said Rich Williams, the report's lead author.

"For decades, student aid was distributed without fees," Williams said. "Now bank middlemen are making out like bandits using campus cards to siphon off millions of student aid dollars."

Students can opt out of the programs and choose direct deposit or paper checks to receive their college aid, but relatively few do. The cards and accounts are marketed aggressively using college letterhead and websites carrying the endorsement of colleges. Higher One also warns students that it will take extra days if they choose direct deposit or a paper check.

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