National Consumers League

Sweetheart deal between banks and universities preying on students


By Sally Greenberg, NCL Executive Director
U.S. PIRG released a report recently that reveals an unholy would even say sleazy – relationship between a huge number of well-known colleges and universities and banks that issue debit cards to their students. The colleges may provide student loans onto the cards and then get what amounts to a kickback – some percentage of the fees – when the bank takes fees from the students’ cards for things like overdrafts or for reloading their cards or depositing money on the cards at the ATMs. PIRG found close to 900 card partnerships between colleges and banks or other financial firms at schools with over 9 million students, or over 2 in 5 (42 percent) of all students nationwide. Thirty-two of the 50 largest public 4-year universities, 26 of the largest 50 community colleges, and 6 of the largest 20 private not-for-profit schools had debit or prepaid card contracts with a bank or a financial firm. US Bank had the most card agreements, at 52 campuses with more than 1.7 million students. Wells Fargo had card agreements at schools with the most students; its contracts were at 43 campuses that have more than 2 million students. A contract between Ohio State University and Huntington Bank includes $25 million in payments to the school over 15 years. It also includes an additional $100 million in lending and investment to neighborhoods surrounding campus. Fees to students include a variety of per-swipe fees, inactivity fees, overdraft fees, ATM fees, and fees to reload prepaid cards. The PIRG report is very measured in making a series of recommendations about these practices, like suggesting relationships between banks and colleges should be disclosed so that the public knows that the school chose the debit card program that gives students the best deal rather than the one that gave the college the most money. So what’s wrong with these programs? Don’t they provide schools with much-needed revenues while giving students the convenience of having their funds on a debit card that they can easily reload? Plenty, that is what is wrong with these sweetheart deals between colleges and banks. Student debt has topped a trillion dollars. Tuition at colleges has gone up far out of proportion to inflation. (Tuition has seen an average annual increase of 6 percent during the 10 years prior to the economic downturn.) Therefore students have to borrow heavily to finance their education. So now we have students getting loans put directly on a debit card and being charged predatory fees with their own colleges getting a cut of those fees. In every way, that is just wrong! So we applaud US PIRG for its revelatory and important study and urge upon lawmakers and regulators the sensible recommendations provided in the US PIRG study. Someone has to take the side of students and their parents and say, “enough is enough!” US PIRG has given us all the evidence we need to do that. We just need the will to act.