Student Loan Debit Cards – Friend or Foe?
Recently, we published a short post about students at a Colorado college who were more than a little put off by the arrival of a newbie on campus – student loan debit cards. The cards are actually being widely distributed, from the east coast to the west coast and many places in between.
What Are Student Loan Debit Cards?
These are cards issued to students, by the schools themselves, through a company called Higher One. The funds on the cards come from the “refund” money students receive after tuition, room and board, and university fees have been paid. The essence of the card seems good – it provides students a way to access their loan money when they need it.
At first glance, the card appears harmless and seems like a great idea. Who doesn’t want easy, quick access to cash to use for books, meals, or supplies? But there is more to it.
Lack of Communication
One of the biggest complaints seems to stem from a lack of communication. Some students don’t realize that using the card is an option – apparently that is not being made clear. And what’s worse about this misunderstanding is that using the card in the wrong way can backfire because of fees.
Fees
If students withdraw money using the wrong ATMs, they can face access fees, similar to the way many banks charge fees for accessing money through third-party ATMs. On the Denver campus, students must use the ATM on campus, otherwise they will pay a fee for withdrawing cash.
Withdrawal Limits
Another point of contention is withdrawal limits. Like most other debit cards, there is a limit to how much cash a student can withdraw using the student loan debit card.
Inactivity Fees
In a recent Washington Post article, the Post reported that students will have to pay a $19 surcharge – a fee taken from their student loan/financial aid money – if the card is not used for 9 months at a time. As the Post notes, this practice has been banned in the credit card industry but is apparently allowed for these cards.
Options for Students
The loan cards are meant to be a convenience for students, but students should know that it’s still possible to receive loan money via other methods – such as a check or direct deposit – but, that has to go through the Higher One website.
“Higher One says it is not coercing students to use its cards. Students can opt to receive their loans by check or through another bank, though they must go through Higher One’s site to make their selection. On average, nearly half of students at each college sign up for the Higher One account, the company said. At schools that have used the program for several years, the adoption rate is closer to 70 percent.” Read more at The Washington Post
Students should not throw away the cards, even though they may look like junk mail (which is another problem some students reported), because there is a replacement fee. Instead, students should open up the letter and read all about the card, and how to use the Higher One website to access other options for receiving loan money.
More Information
- Frequently Asked Questions about the Higher One loan card
- Washington Post article on the loan card
- Denver Post article on the loan card
Always talk to your financial aid counselor if you have any questions about your financial aid, including the loan card if you received one. They will be able to help you answer any questions that are specific to your school and your card. If there’s anything we can help you with, leave a reply below!
What do YOU think?
Have you or a family member received a loan card? Tell us your thoughts below.
