Try this at home: Are campus debit-card agreements deepening student debt?

With the annual cost of getting an education topping $18,000 last year at a four-year public college — and more than $40,000 at a private school — inquisitive journalists are the best “consumer protection” cash-strapped students have.

Here’s a consumer-protection story begging to be localized by college media…

On Feb. 13, the federal Government Accountability Office released a study raising questions about student-aid cards that colleges now commonly issue to students in place of paper financial-aid checks. The cards store value and, depending on their type, may be useable not just for tuition but even at off-campus merchants just like commercially issued debit cards.

These cards generally aren’t issued by the college directly but by a private financial institution. One company, Higher One, by itself has 57 percent of all the cardholder contracts at colleges nationwide.

Colleges love student-aid cards — in part because some of them enjoy kickbacks from the financial institution that increase with the number of transactions. But the GAO report highlighted some consumer concerns:

  • Hidden fees: If a cardholder uses a student-aid card like a debit card at the grocery store or gas station, the transaction typically carries a fee (sometimes as much as 50 cents per transaction).
  • Limited ATM locations: Customers can minimize or avoid fees by using in-network ATMs to make withdrawals, but students told the GAO they found the machines scarce and often crowded; at one campus, the GAO found only a single ATM that would accept the cards.
  • Lack of customer choice: Half of the contracts the GAO examined had anti-competitive provisions — for instance, making colleges agree that only the bank providing the financial-aid card can install ATMs on campus.

In Oregon, some state legislators have voiced alarm that financial-aid money intended to help students meet their basic living costs is being siphoned off for a middleman’s profits. Legislation pending in the Oregon House would require clearer disclosure of the transaction fees that card-users will incur, and one lawmaker is proposing to do away with per-swipe fees altogether.

At a public college that must respond to open-records requests, journalists should readily be able to find out which vendor holds the debit-card contract and what the terms of that contract are (including how much the college stands to make and what its incentives are). Colleges should be prepared to answer how those contracts get issued — at the state level, or campus-by-campus? By competitive bids? How long ago? With how many bidders? And when is the next renewal?

With nearly $1 trillion in outstanding student debt and Washington policymakers focusing on college affordability, journalists can help students understand exactly what’s in their wallet.