NCLC Digital Library: New Rules Limit Fees and Use of Campus Prepaid Cards, Effective July 1

June 29, 2016 — Article

Many higher education institutions use prepaid cards or identification cards linked to bank accounts to disburse financial aid credit to students. Financial aid credit is a student’s remaining financial aid funds after tuition payment and other direct payments to the school have been made.

Schools contract with third party card servicers to steer students into these accounts and receive compensation from the servicers. Schools have been restricting students’ choice of how to receive their aid by implying that students are required to use the campus cards to access their funds or by making it difficult for students to seek other methods of receiving their funds. These campus card programs can subject students to excessive fees, limit student access to funds, and raise privacy concerns. ATM fees and limited access to ATMs, particularly fee-free ATMs, have posed significant difficulties for students.

In response to these issues, on October 30, 2015, the U.S. Department of Education amended its Student Assistance General Provisions regulations pursuant to the Higher Education Act (HEA). The new rules are generally effective July 1, 2016, though compliance with certain provisions regarding disclosures of compensation and school contracts with third party servicers is required by a later date. Chapter 7 of NCLC’s Consumer Banking and Payments Law has been revised to reflect these new regulations.