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Two years after the federal government largely took over the student loan market, the remaining banks in the industry are preparing for another shakeup.
April 9
This story was update Friday afternoon to include comments from Wells Fargo and U.S. Bank
Bank partnerships with colleges and universities may not pay off for students, the U.S. Public Interest Research Group warned in a
The consumer group said that students are being pushed into using debit and prepaid cards
"Every penny of financial aid money should go to educational expenses, not an education in high bank fees," Rich Williams, U.S. PIRG's higher education advocate and report co-author, said in a press release on Wednesday.
Financial institutions and colleges have almost 900 relationships affecting more than 9 million students, U.S. PIRG reported. That includes 32 of the 50 largest public 4-year universities, 26 of the largest 50 community colleges and 6 of the largest 20 private not for-profit schools.
U.S. Bank had the most card agreements of all banks, with relationships at 52 campuses serving over 1.7 million students, the report said. Wells Fargo had card agreements at 43 campuses that have over 2 million students.
U.S. Bank spokeswoman Teri Charest said in an email on Friday, "We offer competitively priced student accounts that have no monthly fees, branches on 27 campuses and a campus card program that gives cardholders convenient access to campus facilities and their personal funds in one card, with little or no cost to the cardholder or the university."
She added, "The scope and requirements of a campus card program are determined by the university and most often with students participating in the decision-making process. Students and employees must opt-in to activate banking and payment capabilities on the card. It is not mandatory."
Wells Fargo offers campus cards at 40 universities, and only one that includes financial aid disbursement services, bank spokeswoman Richele Messick told American Banker on Friday, adding that the default setting is for students to receive their disbursement via check unless they opt to have the money put in a Wells Fargo checking account or an account with another institution.
"While schools are obtaining revenues and reducing costs by outsourcing certain services, the relationships between schools and financial institutions have raised questions because students end up bearing some costs directly — including per-swipe fees, inactivity fees, overdraft fees and more," the report said.
The group also argued that bank relationships with universities may unfairly limit student choice in selecting a bank account.
"When the college has selected a student ID vendor that 'incidentally' offers additional banking services on the college-mascot-embellished card, the student's choices are limited and the student is under the presumption that the college endorses the provider," the report added.
