The Government Accountability Office found that hundreds of colleges and universities contract with financial institutions to offer banking products to students. These products include checking accounts with ATM access and debit cards where federal loan and student-aid money may be deposited.
Among the concerns of GAO investigators: Students at some schools may not have adequate access to ATMs where they can make free withdrawals, and the total fees they are paying to use the cards are not known.
The GAO investigation also brings to light a practice that raises concerns beyond students paying fees to gain access to their loan money: so-called revenue-sharing agreements between some banks and schools. These contracts provide financial rewards to colleges when students patronize a specific bank. Schools may encourage students to open an account with that bank instead of providing unbiased information about other methods of collecting their loan money and student aid payments. The GAO reports that revenue-sharing agreements for college cards have been declining, at least in part due to “the negative public attention the practice has received.” There is something wrong when colleges steer students toward a financial product because the arrangement financially benefits the school, and not necessarily the student.
The GAO investigation came at the request of U.S. Sen. Tom Harkin, D-Iowa. Some of the agreements “look far too similar to the student loan and credit card abuses we cracked down on in the past,” said Harkin.
The 63-page GAO report released in February does not identify schools that were investigated, and the Government Accountability Office would not provide the names to The Des Moines Register editorial board. So we asked Iowa’s three regents’ universities for any contracts with financial institutions offering banking services to students, as well as marketing materials related to those services.