The card arrives automatically in the mail whether students want it or not, and 22-year-old Sergio Roca has to admit it’s pretty cool-looking, emblazoned with the Miami Dade College logo and a glistening nighttime Miami skyline.
“All fancy,” the MDC industrial engineering major said. “It looks very nice.”
But the MDC OneCard, part of a growing trend of bank cards used to disburse financial aid awards, is also criticized for the fees it carries. As banks have increasingly gotten into the financial aid business, students are paying fees such as 50 cents for each debit purchase, or account inactivity fees of up to $10 a month.
Students getting financial aid must activate their OneCard even if they choose to receive their money through a traditional paper check, or through direct deposit to their own checking account. And because the OneCard offers same-day access to financial aid (while the alternatives force students to wait a couple of days or even a week), about 80 percent of MDC students choose the debit card.
“The students are being socked by huge fees,” said Rich Williams, a higher-education advocate with the consumer group US PIRG. “It’s nearly impossible for students to get a fair deal when it comes to campus debit cards.”
Miami Dade College has partnered with Higher One, a financial firm specializing in campus cards, to distribute financial aid funds to students. Broward College has a similar partnership with Citibank. The money distributed to students comes from Pell Grants, scholarships or student loan dollars that are left over after tuition is paid. The money is supposed to cover other student living expenses, such as transportation, food and textbooks.
Some colleges, including Florida International University and the University of Miami, have continued to keep financial aid disbursements in-house — students can receive checks or have the money directly deposited to their personal checking accounts.
With Higher One, a frequent complaint is that the company has ATMs only on-campus, so students looking to withdraw funds on days they don’t have class are inevitably paying Higher One’s $2.50 out-of-network ATM fee, plus whatever the ATM itself charges.
“It’s ridiculous,” said MDC student Steve St. Gerard. “College students have to deal with enough expenses anyway. It’s like fees on top of fees.”
Higher One encourages students to choose the “credit” option when making purchases on the card (it’s accepted as a MasterCard), as that method doesn’t incur transaction fees.
In a statement, Angelia Millender, Broward College’s vice president of student affairs and enrollment, said the school chose Citibank as its debit card partner because it has many local ATMs and its transaction fees “were lower than any other provider.” Still, those fees include a 50-cent debit card transaction fee, a $3 inactivity fee and a $9.95 card replacement fee.
Citibank did not respond to a request for comment.
Earlier this year, Williams’ consumer group released a report, “The Campus Debit Card Trap,” which detailed how colleges across the country are increasingly turning to banks as a way to outsource the cost of awarding financial aid. The report warned that the arrangement, while saving colleges money, often proved to be expensive for students.
Another concern outlined in the report: Students must often go through the bank’s website to choose how they receive their money, and that website is designed to steer them to the bank-provided card. Williams advises students to make the extra effort — at MDC, a special form must be signed — to have the money directly deposited into a traditional checking account instead.
E.H. Levering, MDC’s chief financial officer, said the college saves at least $100,000 a year by no longer printing paper checks and mailing them to students. If a student still wants a paper check, and is willing to wait for it, Higher One mails it out.
Higher One also sweetens the deal for the college by making annual donations of $45,000 to the Miami Dade College Foundation, the school’s charitable arm.
Levering acknowledges that Higher One charges “somewhat unique” fees to students, but he argues students still benefit from the arrangement. For example, Higher One allows all students to open a debit card account, regardless of credit history, and the account offers traditional bank account features such as writing checks and direct deposit of paychecks from employers.
For students who previously relied on check-cashing stores and other options outside banks, Levering said the Higher One account is a better alternative.
“It’s a very nice starter bank account for an unbanked student,” Levering said. “We’ve done more than our due diligence.”
Levering said more than half of Florida’s community colleges have partnered with Higher One.
Higher One’s overdraft fees garnered national attention in August after the company agreed to pay $11 million in restitution to college students as part of a deal with federal regulators. The Federal Deposit Insurance Corp. also charged the company a $110,000 civil fine.
The FDIC had accused Higher One of charging students multiple overdraft fees stemming from a single transaction. Higher One admitted no legal liability under its deal with regulators, and company spokeswoman Shoba Lemoine said the disputed fees affected less than 2 percent of account holders.
Lemoine also said Higher One is phasing out its inactivity fee, and on some accounts the debit transaction fee will no longer be charged. Lemoine stressed that Higher One explains all of its fees on its website, and includes instructions to students on how to avoid each of the charges.
The shift to electronic disbursement of financial aid, Lemoine argued, is more environmentally friendly and ensures that students get their money quicker.
“We want that experience with Higher One to be positive and straightforward,” Lemoine said. “It’s really a misconception that we have all these sneaky hidden fees. It’s absolutely not true.”