[WASHINGTON, D.C.] - U.S. Senator Dick Durbin (D-IL), the Assistant Senate Majority Leader, and U.S. Representative George Miller (D-CA), the senior Democrat on the House Committee on Education and the Workforce, today sent letters to Education Secretary Arne Duncan, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray and Department of Education Inspector General Kathleen Tighe, expressing concern over the adverse financial impact debit card agreements between banks and institutions of higher education may be having on our nation’s college students. Durbin and Miller urged the Department of Education and CFPB to carefully examine the bank-affiliated student debit card practices at over 900 colleges and universities.
According to a report released last week from the U.S. Public Interest Research Group (U.S. PIRG) Education Fund, more than 9 million students across the country are at risk of being nickel-and-dimed to death with fees because their debit cards may come with high user fees, hidden transaction costs and insufficient consumer protections – adding to the mountain of debt many higher-education students must take on.
“At a time when total U.S. student loan debt is reaching the $1 trillion mark, we should not allow costly and inappropriate debit card fees to add to that debt,” Durbin and Miller wrote.
If managed and used appropriately, debit cards can be an effective way to disburse student aid. However, U.S. PIRG found that as many as 900 colleges are pushing students into using campus debit cards that carry numerous unnecessary, costly and unknown bank fees. Sometimes these fees can affect students’ access to their financial aid. Some of the fees highlighted by the report include:
- PIN debit fees: Students are assessed a fee each time they enter their PIN number to make a debit card purchase. This results in steering students to less-secure signature debit transactions.
- Balance inquiry fees: Students are assessed the fee when they check their balance at an ATM. One financial institution charge students 60 cents per inquiry, even those initiated on mobile devices. This does not include charges potentially assessed by the ATM owner.
- Abandoned account fees: These fees are charged after the card has not been used for a certain period of time. One financial institution charges students $19 per month after 9 months of inactivity and will soon charge $10 per month after 6 months, which is well shorter than an academic year. An abandoned account could eventually be closed, resulting in more fees.
- Account closure fees: These fees are assessed when an account is closed. For example, after 18 months of inactivity one financial institution charges the account $25, and any leftover funds revert to the institution, not the student.
- Reloading fees: Students using prepaid debit cards can be charged for reloading or depositing money on the cards at ATMs. At one school, the reloading fee is $4.95.
As students and families struggle to repay the cost of a college education, Congressional Democrats are committed to keeping higher education within reach for every American. One way Congress can keep a college education affordable for students and families is by keeping interest rates for need-based loans for more than 7 million students low and keeping them from doubling to 6.8 percent on July 1.
In April, House Democrats proposed legislation that would keep college students’ loan rates at 3.4 percent by ending unwarranted subsidies to big oil and gas companies. In the Senate, Democrats proposed keeping student loan rates low by asking millionaires and billionaires to pay higher payroll taxes. Unlike the Democratic proposals, which ask some of the world’s most profitable companies and individuals to pay their fair share of taxes, Congressional Republican proposals thus far would shift additional costs onto middle and low-income students and families.
For the full text of the letter to Secretary Duncan, click here.
For the full text of the letter to Director Cordray and Inspector General Tighe, click here.