Financial Institutions Take Advantage of Students
by Jessica Littman | NYU
Having one credit card hold everything – your student ID and meal plan, your debit account, your financial aid – might seem ideal, but colleges that require students to use these multipurpose IDs are allowing financial institutions to take advantage of students.
In a report released earlier this week, the United States Public Interest Research Group Education Fund found that partnerships with banks on student ID cards can cause students to believe that their college endorses a certain bank. Students are then limited in their choice of financial institution, and the institutions that partner with universities reap the rewards.
The report found nearly 1000 institutions of higher education in the United States that have card partnerships, and over 42 percent of students are affected by these deals.
Although there are benefits to these partnerships (the universities make money, the banks gain clients and students get an easy-to-use card from a reputable institution), students also end up paying high fees at ATMs, inactivity and overdraft fees, and other such penalties.
Many financial institutions enforce such penalties on their cardholders, but it is unfair that students should have to use an institution chosen by their college without the chance to find one that charges fewer fees.
One of the most contentious issues surrounding bank-college partnerships is that student financial aid funds (often federal money) can in some cases only be accessed through the student’s card, meaning that students may have to pay ATM and other fees to access their aid. According to the study, banks with influence on campus have an easier time convincing students to accept their private student loans, which usually have harsher terms than federal ones.
The US PIRG Education Fund, which published the study, also pointed out that banks and credit card companies unfairly gain access to students, with tables on campus and free giveaways for students who sign up. While Congress passed legislation limiting these activities in 2009, banks near campuses still find ways to reach out to students as they arrive at school, innocent and susceptible to marketing schemes.
According to the study, colleges have essentially been outsourcing student ID services and financial aid distributions to private financial institutions, which thereby gain unreasonable influence over how students store and spend their money.
The situation is complicated, as many colleges face financial straits and must outsource ID programs or accept contracts to give certain institutions priority on campus. Students should be aware that the bank their college appears to endorse may not be the best one for them and thoroughly research the fees charged by their institution, particularly regarding financial aid.Jessica Littman is a freshman at NYU's Gallatin School of Individualized study. She is from Washington, D.C. and is studying International Development and Journalism.