When your university offers you credit card benefits, it may not have your best interests in mind. (iStock)
Students may think they get the best deals on credit cards sponsored by their college, but a recent report warns that's not the case.
In fact, the Consumer Financial Protection Bureau (CFPB) says that college-related financial products sold to students often have less favorable terms and higher fees than general market products. Masu. report Said.
In addition, students were sometimes charged monthly maintenance fees, overdrafts, and unexpected NSF fees. Some financial institutions impose these additional fees when a student graduates or reaches a certain age based on a “sunset” clause in the product's terms and conditions.
“Many students get their first credit card or savings account when they start university. Banks know that once the product is integrated into their financial life, consumers are less likely to move on to another provider. ” said CFPB Director Rohit Chopra. statement. “Schools need to carefully consider the fees and terms of products they sell to students and alumni.”
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The university earns about $20 million from financial partnerships
The CFPB has identified more than 140 partnerships between schools (and their organizations) and credit card issuers. From 2021 to 2022, financial institutions generated more than $17.3 million in revenue from more than 650,000 student bank accounts, according to the CFPB. They paid more than $19.6 million to universities and affiliated organizations, resulting in an average annual payment of approximately $138,000 from publishers to universities and affiliated organizations.
Some students I was charged $36 for my overdraft.Account holders at historically black colleges and universities (HBCUs), for-profit colleges, and Hispanic-serving institutions (HSIs) often pay higher than average fees per account. The CFPB found that 79% of overdraft and NSF fees combined are paid by 9% of consumers who are charged 10 or more fees per year, accruing a median fee of $380 per year. Stated.
Congress sought to limit the risks of selling financial products at universities and passed the Higher Education Opportunity Act in 2008, providing certain protections against unfair and deceptive private education lending practices. The Credit Card Responsibility and Disclosure (CARD) Act of 2009 curtailed aggressive credit card advertising targeted to students on college campuses.
“However, many universities continue to offer and sell financial products in ways that can mislead students under certain circumstances, including online and email advertising,” the CFPB said.
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Examine the repayment plan for tuition fees
College tuition reimbursement plans have also come to the attention of the CFPB, as some plans have additional fees.
The CFPB announced that nearly 4 million students have some type of tuition payment arrangement with their university each semester. report. This plan is typically sold as an alternative to student loans and is usually interest-free. However, 89% of schools have an enrollment or setup fee, which averages $37 and can reach $250. According to the report, 60% charge an average of $29 in insufficient payment fees per transaction, and 44% charge an average late payment fee of $46 per late payment.
“School-offered tuition payment plans may seem like a good option, but the report finds that student borrowers may end up paying higher fees or waiving their legal rights. This indicates that they may be forced to do so, or their transcripts may be confiscated by the school,” Chopra said. “Universities need to take a hard look at repayment plans and avoid imposing high fees or forced debt collection on borrowers.”
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