Newest Kickback Scheme: Campus Debit Cards

Bank-of-mom-cardLast week, while catching up on my research on private student loan sources, I encountered this attention-getting headline on Huffington Post: Proposal Would Prevent Kickbacks that Steer Students Into Campus Debit Cards.”  According to the article. there are now about 900 campuses loading their students’ financial aid money into prepaid debit cards and peddling them to students.

Sound convenient?

Convenience, however, is coming at a big price for students. It turns out that banks and colleges are splitting millions of dollars on excessive processing, maintenance, and other fees. They are even charging students inactivity fees. That’s right–charging them for not using their debit cards. These “affinity partnerships” amount to nothing more than a new “kickback” scheme that is producing millions in extra dollars for revenue-hungry colleges.

Tom Harkin has already assembled a group of 65 congressional Democrats to introduce legislation to stop the practice. A lot of other organizations, including the U.S. Student Association and the Center for Responsible Lending, are also supporting it. You would think these “kickback” schemes would have stopped back in 2007 and 2008 when colleges were caught referring out private loan sources to students in exchange for a share of the revenue.

A Pricey Scheme

Sadly, it looks like nothing has really changed except the name of the game.  The previously banned “revenue-sharing” is now called an “affinity partnership.”  We all know, of course, if it walks like a duck and talks like a duck, it probably still is a duck. Fortunately, students will be given a choice on where they want the college to deposit their financial aid—check, direct deposit, or in their convenient campus-branded debit card.  Although your college’s financial aid office can be an invaluable resource, tell them you really don’t need to pay for the convenience of their campus debit card.



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