Department of Education to Launch Prepaid Card Program for Excess Financial Aid
The Department of Education is planning to launch a prepaid card for excess financial aid. This will be tested in the spring through a pilot program at four major universities, not yet determined. The pre-solicitation notice says the program could start as early as February 2.
Many college students qualify for financial aid that goes above their cost of attendance. After their tuition and fees are paid, these students receive a refund for the extra funds. The refund can be disbursed by check, direct deposit, a campus-based prepaid card, and even cash at some schools. If a student lives in campus housing, the school may also take out lodging fees before issuing the refund.
The card can be used just like any other debit card, and there are “no fees charged to student or school.” This is convenient for students, but it also means the Department of Education will see exactly how each student uses the loan money. Some students may not feel comfortable having that information on display.
A secondary function of the card is offering financial advice to loan recipients to help control their spending. Students will receive text alerts for their transactions, and can set up controls to limit how their money is spent. All of this data will be available in real-time through the myStudentAid mobile app.
The prepaid card is designed to act like a bank account, which matches the needs of mobile-reliant Millennials. Students will have the option to issue checks from the app and speak with customer service in the event of an issue. There will not be any physical bank branches for students to visit, but card assistance may be available through the school’s financial aid department.
While the funds for the card will primarily come from student loans, the pre-solicitation notice mentions “other funds originated by participating schools.” The terms are unclear at this time, but that may include scholarships, grants, and even private loans coming from the school. Since Pell Grants are a form of Federal Student Aid, they may also qualify to fund the card. Thus, students may not need student loans to get a federally-backed financial aid prepaid card.
More details about the FSA prepaid card will be available after the pilot program.