Among the fees charged to students who open Higher One accounts: $50 if an account is overdrawn for more than 45 days, $10 per month if the student stops using his account for six months, $29 to $38 for overdrawing an account with a recurring bill payment and 50 cents to use a PIN instead of a signature system at a retail store.
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 and the U.S. PIRG report.
Wells Fargo and US Bank combined have deals with schools that enroll 3.7 million, the report says.
Lane Community College’s president, Mary Spilde, said in an interview that the real problem is a “lack of adequate public funding,” which forces students to seek financial aid and colleges to find ways to cut costs.
“Many institutions are looking at ways to streamline and to do things that we’re good at, which is education and learning, and not banking,” Spilde 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.
In the end, students feel locked into accounts before they have a chance to shop for a better deal, Parker-Milligan said.
He said that’s especially tough for poor students who rely on food stamps and other social services. Those students budget down to the penny, and don’t plan on paying a fee when Higher One’s ATM runs out of cash, he said.
Offerings by financial companies vary by campus. Some issue checking accounts with debit cards. Others offer prepaid debit cards, which are similar to bank debit cards but can carry higher fees and offer fewer consumer protections.
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