Department of Education Targets Student Bank Accounts
WASHINGTON, May 15 (UPI) — A proposed rule by the U.S. Department of Education seeks to prevent colleges and banks from pushing accounts with high fees on students.
The department said the regulations would give students greater choice in how they receive refunds from their student aid after college tuition and fees are paid.
As it stands now, some colleges have entered into agreements with banks to outsource the distribution of these refunds through debit accounts or prepaid cards in exchange for financial considerations. Students are often enticed to choose these accounts — which often have high overdraft fees — because they may receive their refunds faster this way, the Department of Education contends.
Under the proposed regulations: students would not be required to open a certain account in order to receive refunds; banks assisting colleges with payments of refunds would be required to ensure students aren’t charged overdraft fees; institutions must provide a list of account options to students; colleges must ensure payments made to students’ preexisting accounts must be made within the same timeframe as those to bank accounts marketed by the college.
“It is critically important to ensure that students can freely choose how to receive their federal student aid refunds,” said U.S. Under Secretary of Education Ted Mitchell. “Students need objective, neutral information about their account options. For example, students should be able to choose to receive deposits to their own checking accounts and not be forced to utilize debit cards with obscure and unreasonable fees.”
Consumer Bankers Association President and CEO Richard Hunt criticized the proposed regulations, saying it will ultimately cost students more.
“Though today’s proposal seems to have improved from its original form, what is being veiled as pro-consumer reform is far from it and based on little to no actual data,” he said. “The burdensome cost of new regulatory requirements on schools will ultimately be paid for by students, increasing the cost of college at a time when the government should be trying to do the opposite. The banking industry is heavily supervised by numerous regulators that specialize in financial products. It is hard to believe Congress ever intended the Department of Education to wield authority over financial services.”