The Debit Card Trap

Dennis Gosnell

Assistant Editor

In part one of this story, U.S. PIRG referred to campus debit cards as a trap in which students end up paying high fees.

According to U.S. PIRG, for years students could receive their financial aid free by check or direct deposit. Colleges would have to pay about five dollars per student to disburse aid. When colleges turned to financial institutions like Higher One, colleges were relieved of the cost of disbursement and those fees were handed over to the students.

Why the need for companies like Higher One

“On Nov. 1, 2007, the Department of Education officially updated the Cash Management Electronic Disbursement of Title IV Funds section, and these regulations pertained to federal student aid programs,” Keith Ogans, Vice President of Business Affairs said.

Ogans described the old system as inefficient and wasteful, not to mention a waste of time for students who would have to stand in line to receive their student aid money.

The update of the Title IV Funds section regulations required schools to start depositing or refunding students electronically and had until June 30, 2009 to comply with these new regulations.

“Some students did not even have a bank account or even qualify to have a bank account. We wanted to ensure all students had access to direct deposit and Automated Clearinghouse Transfers. College staff did not want the college to incur increased additional costs due to an additional workload,”

In spring of 2008, RSC met with members of OCCC to see how they were going to accommodate the new regulations. Business Affairs found that OCCC was using Higher One to satisfy the new regulations. In Oct. 2008, Business Affairs took a proposal to the Board of Regents to start working with Higher One.

“With Higher One, all students have access to a bank account. This however, does not mean that students are required to use Higher One. They can have their student financial aid direct deposited into their own bank accounts, or have paper checks mailed to them, not many students opt to use this option though,” Ogans said.

When the responsibility of disbursing federal student aid and refunds was lifted off of the school’s shoulders, Williams says student’s pay on average $49 per year in fees.

“Many students find themselves hamstrung into accepting the low-quality bank account because of long wait times to receive financial aid by any other method,” Williams said.

He went on to say that direct deposits can take up to a week, and mailed checks can take up to two weeks for students to receive their student financial aid. When students depend on this money and need it promptly, there is nothing but the “preferred bank product” left for them to use.

For additional information on the “Debit Card Trap,” check out US PIRG’s website

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