New Rules for College Debit Cards and Financial Aid Disbursements
The U.S. Education Department is creating new regulations for college-sponsored debit cards used for financial aid disbursements. The rules are designed to protect students from being charged high fees for using the cards and to prevent colleges from forcing students into card agreements.
The new regulations are scheduled to take effect next fall. One of the most significant changes included is the removal of overdraft fees on accounts set up for financial aid. These overdraft fees can cost students as much as $710 per year, according to a report from the Center for Responsible Lending earlier this year.
The rules will also require schools to provide students with a neutral list of the different ways they can receive their financial aid disbursements, rather than promoting cards that pay the school some form of revenue. This will give students a chance to choose the disbursement option that best suits their needs without a biased objective.
The Department of Education reports nearly $25 billion in federal grants and loans are dispersed to students in schools with card agreements, which amounts to 40% of the country’s college students. These new regulations should provide a more even distribution of financial aid refunds, rather than a large concentration of card deposits.