Campus Debit and Prepaid Cards and the Best Financial Interest Standard

There is a long, unfortunate history of colleges and universities steering students toward predatory financial products. Across consumer financial markets — from student loans to credit cards — schools have been caught making back-room deals with lenders at borrowers’ expense. The market for school-sponsored prepaid cards and debit cards clearly follows this example. These cards are meant to help students conveniently access money from federal student aid left over after tuition and fees are paid, including books and housing. Regulators, lawmakers, and consumer advocates have all warned that industry regularly sneaks in excessive and unfairly structured fees that can cost students hundreds of dollars a year. The Department of Education put rules on the books to create guardrails against many of the most egregious fees and tactics in the space in 2015, but its weak implementation of these standards has so far allowed extensive borrower harm to continue.This issue brief outlines a more robust interpretation of the 2015 “best financial interest” standard — the standard intended to protect students and rein in colleges when negotiating agreements with third-party financial institutions, and concludes that existing regulations, paired with updated guidance to schools, are capable of finally affording borrowers the protections they deserve and are entitled to under the law