Nearly 900 colleges and universities have partnered with banks to market debit or prepaid cards to students, a new report has warned.
The report, by public advocacy group the U.S. Public Interest Research Group Education Fund, found that banks use aggressive marketing tactics to bring university students in as customers, with encouragement from the universities themselves. The report found that 32 of the country's 50 largest public 4-year universities had debit or prepaid card contracts with a bank or financial firm. While colleges benefit financially from the contracts, the students can end up losing out. The fees for the cards "can be steep and frequent for students using the university-adopted cards," the report found.
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The company that makes the most use of those contracts is Higher One, which has contracts with 520 college campuses. The company's fees have prompted complaints at a number of campuses, the New York Times reported.
To be sure, banks are no longer allowed to partake in a number of student-centered marketing tactics, such as providing gifts to students that sign up for credit cards. But the report found that colleges have found other ways to partner with banks, by turning student ID cards into debit cards and then "allowing lenders to take over disbursement of financial aid," the Times reported. In some cases, schools received extra money for allowing a bank to have exclusive access to the students.
“Campus debit cards are wolves in sheep’s clothing," Rich Williams, the lead author of the report, told the Times.