image by flickr user lendingmemo (cc license)
Over the past four months, debit cards on college campuses have faced heightened scrutiny. Much of this scrutiny has come from the Consumer Financial Protection Bureau (CFPB) and the Government Accountability Office (GAO). Today, the Department of Education’s Office of Inspector General has published a report that is sure to garner attention, both on Capitol Hill and on college campuses nationwide.
The lengthy report comes as a repsonse to “an inquiry from Congressman George Miller and Senator Richard Durbin regarding the use of debit cards to deliver Title IV funds to students.” The main focus is the dispersement of federal financial aid funds through a debit card, often through a private servicer. The objectives of the report were fourfold:
- (1) identify the methods, terms and conditions, and time frames for delivering Title IV of the Higher Education Act of 1965, as amended (Title IV) funds to students;
- (2) determine what personal student information is provided by schools or collected by servicers during the Title IV funds delivery process;
- (3) identify school and servicer procedures for addressing student complaints about the use of debit cards to deliver Title IV funds; and
- (4) determine how Federal Student Aid (FSA) monitors schools’ and servicers’ delivery of Title IV funds through the use of debit cards to protect students from inappropriate practices
The report, which you can and should read in full here, states that the Department of Education must take action “to better ensure that the interests of students are being served when schools use servicers to deliver credit balances.” The report issued multiple suggestions to act in the best interest of students. Many of these focus on transparency, protection of student information not necessary for transactions, convenience and the potential free access to ATMs for students withdrawing financial federal aid on campus.
Not surprisingly for an issue with a financial transaction component, many of the solutions that the Department of Education will have to seek will be regulatory in nature. This includes the needed development of student consumer protection regulations for “credit balance delivery services addressing conflicts of interest and financial incentives, similar to those governing institutions and lenders in 34 C.F.R Part 601.” College Parents of America supports the need for greater regulated transparency and protections for student fund dispersements. There should be no conflict of interest when it comes to putting student (and parent) finances in the best, safest position as students pursue a college degree.
Just as we have covered this and other issues of transparency in higher education in detail, especially over the past few years, we will continue to inform you of developments, proposals and reports calling for needed student protection and will continue to advocate on behalf of college families when relevant regulations and legislation are proposed.