American Banker: Lawmakers Push Rule Changes at DoE over Student Accounts
By Victoria Finkle
April 23, 2014
WASHINGTON - A Democratic coalition of nearly two dozen lawmakers is urging the Department of Education to change its rules to better protect students from unfair banking practices at colleges.
The lawmakers, led by Sens. Elizabeth Warren, D-Mass., Tom Harkin, D-Iowa, Dick Durbin, D-Ill., and Rep. George Miller, D-Calif., sent a letter Wednesday to the Department of Education responding to proposed changes to the agency's Title IV cash management rules, which dictate the distribution of federal student aid. An agency rulemaking panel released proposed changes to the rules last month.
"The Department of Education has the authority to issue rules related to the disbursement of student aid refunds, and it should use that authority to mandate contract transparency, prohibit aggressive marketing, and ban high fees when colleges partner with banks to sponsor debit cards, prepaid cards, or other financial products used to disburse student aid," says the letter, which was signed by 23 members of the House and Senate.
The letter cites a recent report by the Government Accountability Office that found that 40% of college students are enrolled in schools that have agreements with financial institutions to market debit cards to students. The study warns about high fees charged to students for those accounts and raises questions about whether certain schools use "undue influence" to push students into opening an account with a partnered institution. Reports have also found that some schools may receive payments for exclusive access to market accounts and cards to students.
The group of lawmakers recommends that the Department of Education design rules that ensure students are always able to have Title IV aid easily distributed into a personal account, prohibit schools from partnering with institutions that charge fees related to use of student aid funds, ensure students have access to "neutral and unbiased information" about accessing student aid, ban revenue sharing deals and require colleges to post agreements with financial institutions online.
Read the article on the American Banker website here.