Blogs

Wow! What a week it has been for Higher Education payments. I traveled to Washington, D.C. on Wednesday to present comments to the Department of Education concerning Title IV financial aid disbursements, aka “student refunds.” When I landed, my phone was full of messages concerning a study released by US PIRG called “The Campus Debit Card Trap.” Over 350 news outlets across the U.S. picked up the story, reporting that banks and financial firms are taking advantage of unsuspecting students with high-fee bank products used in the financial aid disbursement process. This is unfortunate since neither banks nor colleges and universities are doing well in the press lately, and now they are being packaged together for questionable business practices.

We’ve been following the topic of student refunds very closely for years and have acquired a lot of knowledge along the way. As I’ve said before, there is nothing wrong with offering a low-fee debit card option within a comprehensive Title IV disbursement program (see our concept for student-friendly refunds, “4 for Title IV EDisbursement Framework”). The key to an effective student refund program is to make direct deposit the primary method of disbursement. Let’s face it, most students already have a bank account and they do not want another. For those students who do not have an existing bank account, a debit card can be a good choice. One big problem has been the hard sell of new bank accounts at the expense of other options. When direct deposit to an existing bank account is the “jump through the hoops” choice, students are in effect being pushed to the bank account option. There is no reason why direct deposit should be the cumbersome choice. This manipulation of the process has caused as much or more student dissatisfaction as the high fees themselves.

This story has legs and won’t go away soon. The odds are high that the Department of Education will make recommendations for changes in order to protect students. But that will take time. For now, make sure you are in a position to answer the tough questions—from the press, students, parents, and campus executives—about your disbursement process. In the complex world of electronic payments, I’m “up in the air” on some things, but how students get their Title IV refunds is not one.

Thanks for reading,

Dan Toughey
daniel.toughey@touchnet.com

P.S. Click here to read my public comments to the Department of Education.