Student Debit Card Programs: Friend or Foe?

The rising cost of tuition, the loan burden, the diminished grant availability—these usually come to mind when the subject is paying for college. Surprisingly, though, many students are actually entitled to thousands of dollars in refunds, usually paid when students borrow more then they need to, or when late federal aid arrives supplementing already paid tuition fees.

The distribution of these “refund checks” can be both timely and costly, especially for two-year colleges lacking the resources of their four-year counterparts. St. Louis Community College officials know firsthand how chaotic refund dispersal can be. So frenzied in fact that Carla Chance, vice chancellor for finance and business services, called the refunds process “Pell Hell” in an article in the St. Louis Post-Dispatch.

To curb the confusion, St. Louis Community College has teamed up with Higher One Holdings, a debit card program that issues students MasterCard debit cards with their refunds loaded. At some schools, the card is used as a student’s official ID, making the use of the program unavoidable.

Community colleges using Higher One’s program claim that about $200,000 is saved every year, as checks no longer have to be printed and less staff is needed for the disbursement process. They also claim that this is easier for students, especially those who do not have checking accounts.

But consumer protection agencies have different feelings. Ed Mierzwinski, who heads the consumer protection division of U.S. PIRG, notes that the card’s high fees—including a $2.50 charge to use other companies’ ATMs and up to $19 per month for any funds that have been inactive for nine months— does not have the student’s best interest in mind.

Perhaps it would be a non-issue if students had a choice. Yet with students forced to access Higher One’s website to decide how to receive funds, as Mierzwinski contends, “it’s obviously weighted towards opting in.”

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