The Department of Education released new rules Tuesday to protect students from fees and other "troubling practices" common with debit cards carrying financial aid refunds.
Students receive the cards when they have financial aid money left over after covering the cost of tuition and other fees. Students are allowed to use the refund money for other education-related expenses, such as books. In the last few years, schools have increasingly partnered with banks to give the money to students on debit cards.
See also: 'Campus card' agreements may dip into student aid
About $25 billion in federal student aid goes to students through these cards each year, the Department of Education estimates.
But the cards often carry steep or unexpected fees, such as "swipe fees" that charge a customer each time he or she makes a purchase with the card. The cards are also often presented as the only way to access financial aid refunds.
Under the new regulations, schools and banks must:
- Allow students to freely choose how they receive their aid and their refund;
- Provide unbiased information about all disbursement options; and
- Stop charging "excessive and confusing fees" on campus cards.
"Overall, this is a really decisive victory for students," says Christine Lindstrom, director of higher education at the United States Public Interest Research Group. She estimates more than 2 million students will start saving money after the rules go into effect in the second half of 2016 (Weisbaum, NBC News, 10/28; Carrns, "Your Money," New York Times, 10/27).
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