The government and consumer advocates are raising concerns about the deals made between colleges and financial companies to provide banking services to students. A report from the Consumer Financial Protection Bureau (CFPB) pointed to a trend among banks to pay colleges to offer institution-branded student ID cards that doubled as debit cards. Besides dual-purpose cards, some colleges were also paid to offer separate debit cards that students could use to access federal financial aid.
“We are distressed to hear that some students feel pressured to use specific products and may be unaware that when they sign up for those products, their schools are secretly making money,” said CFPD Head Richard Cordray.
A 2012 study reported nearly 900 colleges have agreements with banks or financial companies for debit or prepaid cards for financial aid disbursement, student identification cards or other services.
Higher One, which specializes in offering financial services to higher education institutions, controls the largest market share. More than 500 campuses, including Webster University, held agreements with the company in 2012.
According to a 2011 interview with universitybusiness.com, Webster partnered with Higher One in January 2007. At the time, 37,000 Higher One debit cards had been issued to students.
Reporting by Dan Bauman
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