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Report spotlights fees on college-sponsored student cards

Kate Davidson Feb 14, 2014
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More than 850 colleges offer their students school-sponsored debit or prepaid cards, most of which allow students to recieve financial aid directly to those cards. Many schools and card providers see them as an efficient way to get funds to students. 

But the fees students get charges on those cards, and transparency surrounding how the cards work, are getting scrutiny: The Government Accountability Office raised concerns in a report published last week. The GAO’s Alicia Puente Cackley says students receiving federal aid are supposed to have convenient access to ATMs that don’t charge fees.

“What it means to be ‘convenient access’ is not very well defined by the Department of Education,” Cackley says. “In different places you saw very different numbers of fee-free ATMs that were available to students.”

The report also found two large providers charged students for using their cards as debit cards – i.e., swiping and entering a PIN.

“These cards are called debit cards,” says Christine Lindstrom, the higher education program director with U.S. PIRG. “Yet if you use it as a debit card and use your four digit PIN, you will incur a 50 cent per transaction fee for doing that.”

The GAO report noted that about a third of PIN transactions are for small amounts, “which can make a $0.50 fee a significant cost relative to the amount of the transaction.”

Christine Lindstrom says the debit fee is unusual, catching students unaware. She’s due to take part in the Department of Education panel looking into new rules for college debit cards this week.

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