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Students can opt out of the programs and choose direct deposit or paper checks to receive their college aid, but relatively few do. The cards and accounts are marketed aggressively using college letterhead and websites carrying the endorsement of colleges. Higher One also warns students that it will take extra days if they choose direct deposit or a paper check.
In the end, students feel locked into accounts before they have a chance to shop for a better deal, Parker-Milligan said.
He said that’s especially tough for poor students who rely on food stamps and other social services. Those students budget down to the penny, and don’t plan on paying a fee when Higher One’s ATM runs out of cash.
Offerings by financial companies vary by campus. Some issue checking accounts with debit cards. Others offer prepaid debit cards, which are similar to bank debit cards but can carry higher fees and offer fewer consumer protections.
Often, students’ campus ID cards double as payment cards. At the University of Minnesota, TCF Bank issues cards that serve as school IDs, ATM and debit cards, library cards, security cards, health care cards, phone cards, and stored-value cards for vending machines, the report said. TCF also has branches on campus and 25-year naming rights to the football stadium. Its cards charge similar fees, the report says.
Having such visibility on campus is a big benefit for banks seeking exclusive access to an untapped group of potential customers. Many banks are willing to pay universities for the privilege.
Under its contract with Huntington Bank, Ohio State University will receive $25 million over 15 years, plus a sweetener of $100 million in loans and investments for the neighborhoods around campus, the report said. Florida State receives a portion of every ATM fee paid by a student, it says.
It’s difficult to get a full picture of how much money the schools are getting because most of them refuse to release their contracts with banks. Only a handful were available to the authors of the report.
Ohio State and Florida State did not immediately respond to requests for comment. The National Association of College and University Business Officers, a trade group involved in the issue, did not respond to multiple requests for comment.
Lane Community College receives no payments under its contract with Higher One, Spilde said. Lasiter said Higher One does not "offer revenue sharing" to colleges that it partners with. However, Higher One does pay some universities under existing contracts, according to the public interest group report.
Campus card deals have become more popular in part because of recent legal changes that cut into the profits banks can generate from students.
A 2009 law banned credit cards given to students who had no way of repaying. It forced colleges to disclose deals with credit card companies and stopped some forms of marketing, such as offering students free gifts in exchange for obtaining a credit card.
Until recently, banks also made a lot more money from student loans. They extended federal aid to students, and also offered confusingly similar, higher-cost private loans alongside the government programs. Congress cut them out of the equation in 2010.
Neither change affected debit cards. As the recession forced states to slash higher education budgets, companies such as Higher One, Wells Fargo and U.S. Bank approached colleges with an attractive proposition. The companies would assume the cost and hassle of handing out student aid funds, often paying for the privilege.
Tribune reporter brian Maffly contributed to this story
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