Inspector General Report on Campus Debit Card Use Confirms Need to Better Protect Students

Colleges must ensure federal aid can be accessed without fees, monitor third-party servicers to increase transparency and remove conflicts of interest

[WASHINGTON, D.C.] - U.S. Senator Dick Durbin (D-IL) and U.S. Representative George Miller (D-CA) today said that a Department of Education Inspector General (IG) report they requested in 2012 recommends that the Department of Education should take action to better ensure that student interests are protected when colleges and universities use third-party servicers - such as Higher One and Sallie Mae - to deliver Title IV student financial aid dollars to students.


“The Inspector General has expanded on the concerns expressed in the recent GAO report that warned students may be driven into deeper debt when financial aid dollars are disbursed via certain financial institutions. Today’s report demonstrates the clear need for the Department of Education and colleges to better protect students and their financial aid,” said Senator Durbin and Representative Miller. “We must closely examine the recommendations made in this report and work to ensure transparency, rein in fees, prevent conflicts of interest, and safeguard students’ personal information.”


Specifically, the report recommended that the Department of Education craft regulations to:

  1. Require schools to monitor third-party servicer’s compliance with Title IV requirements; have a process to resolve student complaints; increase transparency by providing students with disclosures; and disclose annually the average costs incurred by students who establish an account with the servicer.
  2. Ensure third-party servicers provide objective and neutral information to students about campus debit cards; do not charge transaction or administrative fees to access Title IV funds; and comply with privacy laws.
  3. Address conflicts of interest and financial incentives in campus debit agreements and define convenient access to fee-free campus ATMs.


Durbin and Miller also joined together in June 2012 to send a letter to the Director of the Consumer Financial Protection Bureau (CFPB) Richard Cordray expressing concern over the adverse financial impact debit card agreements between banks and institutions of higher education may be having on college students.  Durbin and Miller urged the CFPB to carefully examine the bank-affiliated student debit card practices at over 900 colleges and universities. A copy of the letter to Director Cordray and Inspector General Tighe is available here.


In response to Durbin and Miller’s request, the CFPB announced that it would be launching an inquiry into the impact of campus financial products marketed to students by colleges to determine whether these arrangements are in the best interest of students. In September 2013, the CFPB hosted a public forum to present its initial findings, based on public comments and other market information. Already, CFPB has found a shift in financial product marketing partnerships from college credit card agreements to student checking and debit and prepaid card products.


Also, in September, Durbin and Miller sent letters to some of the nation’s largest banks asking bank executives to explain the scope of their financial arrangements with colleges, how much money the deals pay to colleges, and how much in fees are charged to students. The letter was also signed by U.S. Senators Sherrod Brown (D–OH) and Elizabeth Warren (D–MA) and U.S. Representatives Maxine Waters (D-CA), Louise Slaughter (D-NY), and Peter Welch (D-VT). A copy of that letter is available here.


According to a report released 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 with unreasonable fees because their campus 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 are already taking on.