A parent’s biggest dream is to ensure his child is educated and prepared to face the world, armed with knowledge and the head start a good education provides. Unfortunately, the very institutions that a parent turns to might be the reason these young people start out already in a financial hole and with debt they nor their parents could have ever anticipated.
This, according to a report released on Wednesday by Public Interest Research Higher Education Fund. Rich Williams, a spokesperson for the group said,
Bank middlemen are making out like bandits using campus cards to siphon off millions of student aid dollars.
It’s believed as many as 900 American colleges are doing their part to “push students into using payment methods that carry hefty fees and other costs”. The report also said both colleges and banks are raking in millions of dollars in fees – and worse, this could be happening illegally. The report, not yet released to the public, has been received and evaluated by the Associated Press.
The report also stated two out of every five college student in the United States attends a school that has a deal with any number of financial companies. That’s more than 9 million students. And the vast majority of these students are likely going to find themselves believing there are few options or alternatives to what’s being offered them and their families. Many of these students could realistically be paying down their student loan debt for many years.
No Longer Fee Free
Many parents who received student aid during their own college days likely recall the absence of additional fees – straightforward and with no hidden traps. That’s no longer the case, though. Now, student aid has its own fee structures – along with the traditional costs associated with applying for and receiving that same financial aid.
One of the biggest costs associated with these new “fees” is the third party companies that actually print and mail traditional paper checks. This has traditionally been completed by the colleges; now, though, third party companies have lifted that burden off the facilities’ shoulders. It’s the customer who pays to have is check mailed to him.
Unsecured Debt
It’s no longer America’s well-kept secret that student loans now total more than credit card debt in this country. In fact, total student debt far surpassed the $1 trillion mark awhile ago. Usually, college students and their families use two sources of funding college: student loans and credit cards.
Because student loans don’t cover things like “recoding fees”, students are turning to credit cards to offset these confusing fees. Some colleges even have fees students must pay if they don’t turn in all of the necessary paperwork the first time. Even the Department of Education has stepped in and determined many fees are not biding or not allowed.
Some of these companies are claiming students and their families should have more closely read the terms and conditions associated with any financial paperwork. It’s overwhelming for many though simply because they had no idea how complex the process had become in recent years.
The study also revealed students can have their student aid or loan proceeds direct deposited into their bank accounts; however, there are significant amounts of money spent on marketing designed to sway students to take another route: specifically, the company’s own branded debit card.
And, of course there are fees associated with using those cards. These offers differ from one campus to another as do their products. Some include checking accounts with high fees and few protective mechanisms in place while other companies opt for something else.
Ohio State University
Ohio State, according to analysts, will receive a staggering $25 million in fees over fifteen years. Other colleges have different deals. Florida colleges receive a percentage of ATM fees. If you’re wondering how to locate the agreements or paperwork, don’t bother. These schools do not want to release the contractual details.
Of course, the 2009 CARD Act plays a role. New rules prohibit credit card companies from issuing credit cards to students who have no way to repay the money. Not only that, but banks are no longer allowed to compete with the government’s student aid programs. Clearly, banks must now scramble to offset the losses of these types of loans. Even though they’re making big money in these dynamics, they’re having to revamp their methods of entry. Can’t collect profits by directly dealing with students, then simply go through the back door with the colleges and third parties.
This was not the spirit in which these new laws were created. The goal was to better protect college students, not add further burdens. Instead, it’s done exactly what the CARD Act had sought to eliminate; the difference is it’s much worse now than it was before new regulations kicked in.
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