If you’re college-bound this Fall, you’ll benefit from a recent Department of Education ruling that governs certain campus debit and prepaid cards.
These cards are often marketed by colleges as an easy way for you to receive and use remaining Federal aid funds, once your tuition and other fees have been disbursed.
The new ruling, which took effect July 1, is designed to provide broader options regarding how you receive your student aid, aims to limit excessive fees, and much more.
What Are Campus-Sponsored Debit And Credit Cards?
There are two types of campus-sponsored cards:
- Campus-sponsored debit cards can be reloaded with funds over and over again.
- Campus-sponsored prepaid credit cards hold only a predetermined amount of money.
Both types of card can be used to pay incidental educational expenses like text books, transportation, and even rent. In many instances, the card may double as your student ID. While some are linked directly to your bank account, only those cards used for the disbursement of financial aid are covered by these new rules.
Why Were The New Rules Introduced?
The government estimates that around 9 million students now use these cards to disburse almost $25 billion of Federal student aid funds. Consumer advocates expressed concern about their proliferation for a variety of reasons:
- In return for compensation, your college may have made an exclusive deal with a card issuer. This limits your ability to shop around.
- This lack of competition can mean you end up paying higher card fees.
- Because they’re classified as debit cards, these cards aren’t subject to the Credit Card Accountability & Responsibility Disclosure Act of 2009, which restricts the marketing of credit cards to students. Your college may be able to share your information with the card provider without asking your permission.
The new Department of Education regulations will ensure more transparency, greater choice, and lower fees for campus-sponsored cards that directly disburse Federal financial aid. Changes include:
- Your college can no longer require you to receive your student aid funds via a certain type of campus-sponsored card.
- You must be informed of all the options available to you for receiving your financial aid balance. These options must be presented in an ‘objective and neutral way’, so that you can freely choose the best method for you.
- Your college must evaluate potential fees before selecting campus-sponsored cards.
- A schedule of estimated fees for campus-sponsored cards must be publicly available.
- If you do choose a campus-sponsored card to receive and access your financial aid funds, certain fees can no longer be charged. These include inactivity fees, point-of-sale fees (also known as ‘transaction-swipe’ fees), and overdraft fees.
- If you choose a different method of receiving your Federal student aid, your electronic aid payments must be processed as quickly and easily as those made to campus-sponsored cards.
- Colleges must disclose any compensation they receive for entering into such agreements.
- They are more limited in the information they can share about you.
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