In favor of a “College Buyers’ Guide” by the Consumer Financial Protection Bureau
pic by flickr user nesster (cc license) The Consumer Financial Protection Bureau (CFPB) continues its push for sunshine/transparency for financial organizations’ relationships with institutions of higher education. In a blog post last week, the CFPB discussed how many of these arrangements work:1. Direct payments for using school logos: We found several agreements where a financial institution offers a licensing fee in order to use a school’s logo to market its financial products. (In 2008, Congress restricted this practice for student loans, but not for other financial products.) For example, we found an agreement which provides $25 million to a university for use of the school’s logo, among other benefits.2. Bonuses for recruiting students: Other agreements provide bonus payments based on whether students sign up for a financial institution’s student checking account marketed on campus. For example, one agreement paid a university an upfront payment of $400,000 and an additional bonus of upwards of $200,000 each year if enough new students signed up for the accounts.3. Discounted prices in exchange for marketing access: Some colleges receive discounted – or even completely free – services in exchange for allowing a provider to market financial products to students. For example, we found many agreements where a financial institution charges a university to transfer loan and scholarship funds to students.However, some school officials have told us that these charges may be heavily discounted, since these agreements provide the financial institution with unique access to market to students receiving financial aid. This gives the financial institution a foot in the door to generate significant revenue in fees from students, making it worthwhile to provide discounted services to schools. The CFPB went on to praise the voluntary disclosure of such agreements as a commitment to transparency and informed consumer choice. College Parents of America praises these efforts as commonsense, consumer-friendly steps that these institutions can take. Thankfully, college financial transparency has increased significantly since the days of on-campus Frisbees, T-shirts and candy in exchange for college credit card applications. Transparency in college isn’t yet perfect, however.
