Hundreds of thousands of students across the country paid stiff banking fees after colleges agreed to marketing deals with big banks, based on a study\u2026<\/b>
\nHundreds of thousands of students across the country paid stiff banking fees after colleges agreed to marketing deals with big banks, based on a study obtained by the Free Press through a federal open records request.
Collectively, students paid $27.6 million in account fees over just one year across campuses reviewed in a newly disclosed study conducted by the Consumer Financial Protection Bureau. The figure is likely higher since all schools were not reviewed.
Colleges are looking for extra money, while banks want young customers. But the marketing marriage might be harmful to the pocketbooks of some cash-strapped students, depending on the type of agreement reached between the college and the bank.
College students dished out as much as a weighted average fee of nearly $47 per active account to Wells Fargo in a 12-month period.
Others, though, paid no charges on average to Fifth Third Bank, according to the report just made public by the Consumer Financial Protection Bureau.
The study involved data from July 1,2016-June 30,2017.
Unfortunately, some colleges had a financial incentive to encourage students to open accounts with banks that had higher fees.
About 116 colleges collectively received more than $16.6 million in royalties or payments \u2014 an average of around $36 per account \u2014 from the financial institutions as part of such agreements, according to the study done by the watchdog agency.
How much you paid in fees varied greatly by the bank connected with your college.
The report raises more questions about whether some banks are unfairly burying students, who are already taking out hefty student loans, in extra fees. Concerns about potential conflicts of interest continue, as well.
Snagging a deal with a college, of course, can be a moneymaker for banks. Banks may be able to capture prime spots for setting up marketing tables at campus events. Some students may even have the impression that the bank is offering them the best deal because the bank is touted as the school\u2019s preferred banking option.
The CFPB report, which drew from a database of nearly 600 marketing agreements between colleges and account providers, first came to light in a resignation letter written by the chief federal watchdog for student loans.
«The American dream is under siege,» wrote Seth Frotman, assistant director and student loan ombudsman for the Consumer Financial Protection Bureau.
Frotman, who resigned effective Sept. 1, charged that new evidence was essentially being suppressed and that the nation’s largest banks were «ripping off students on campuses across the country by saddling them with legally dubious account fees.»
Frotman charged that President Donald Trump’s administration is protecting lenders and big business. It is not known if the newly released report is the exact report that Frotman referenced.
The CFPB initially raised concerns in late 2016 about «costly fees and risky features that can be attached to certain college-sponsored accounts.»
Some tougher restrictions now are in place involving fees charged by banks for debit cards connected to dispersing financial aid, according to Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com.
The U. S. Department of Education has a pilot program to test putting financial aid dollars onto what’s called a Next Gen Payment Card. Some worry this new program could be used to monitor how students spend that money and possibly lead to more limits.
But Kantrowitz sees some possible upside for students, particularly if no fees are charged to access financial aid and future marketing to students is limited.
«The actual data of students using their financial aid for tattoos instead of textbooks is going to be minimal,» Kantrowitz predicted.
The CFPB study was released to the U. S. Department of Education in early February in order to offer more background information, as the department moved forward with its Next Gen Payment Card Program Pilot, according to a cover letter supplied with the Freedom of Information request.
The Free Press made an open records request for information shortly after Frotman resigned in September. Here’s a look at some findings of the recently released report:
Read more:
Student loan watchdog quits, says largest banks ‘ripping off students’
Gift ideas: College savings plan contribution or Monopoly for Millennials
Here’s why it’s harder for millennials to build wealth
The report does not name individual schools.
The University of Michigan has a well-known agreement with PNC Bank, though.
According to other disclosures, U-M was paid $900,000 for the period from July 1,2016-June 30,2018. During that time, 7,186 accounts originated under the contract. On average, student costs were $12.90 in the year ended June 30.
The CFPB report reviewed data involving 95,376 active PNC accounts where the average weighted fee paid was $15.84. The 34 colleges in total had received nearly $7.6 million in compensation from PNC for such agreements.
The report is important because earlier the U. S. Department of Education had taken some steps to protect students from abusive fees. But now there is growing concern that conflicts continue.
Most colleges are required to ensure that marketing agreements are «not inconsistent with the best financial interest» of students, according to the CFPB report.
As of Sept. 1,2017, the vast majority of colleges with marketing agreements for deposit or prepaid accounts are required to publish information on the use of these accounts by students, as well as the related fees the students pay.
In addition, any financial compensation that is part of these agreements must be disclosed.
The CFPB analysis, which covered 1.3 million students, disclosed that most students at most colleges are able to use their college-sponsored account fee-free.
«However, certain account fees and providers still pose risk to student consumers,» the report stated.
«A subset of student account holders pay a disproportionate share of the total fees paid by account holders at a given college,» the report stated.
In a prior study, the consumer watchdog bureau determined that about 10 percent of younger depositors \u2014 those aged 18 to 25 \u2014 with accounts at large banks incurred 10 or more overdrafts per year. Such students could end up paying hundreds of dollars a year in overdraft fees.
The best bet for students, of course, continues to be to shop around and review what kind of fees might be associated with individual banks.
It’s key to remember that the financial arrangements between colleges and banks may not always be in the student’s best interest.
Banks, credit unions and other financial institutions may pay colleges based on the number of students who open accounts. The payment may be a fixed amount for each student or an annual payment based on the total number of students using an account. Other factors can come into play when it comes to generating revenue for the college, as well.
The conflicts could arise, if such revenue-sharing «encourages high-fee financial products that crowd out competition from providers of accounts,» the report noted.
The study showed that schools that receive substantial amounts of money may be associated with banks that trigger higher fees.
The CFPB, according to information in the disclosed report, indicated that the average fee per active account was around $12 where colleges were not paid by banks or financial institutions. About 457 colleges fell into this category.
By contrast, the average fee per active account was $36.52 at 116 colleges that received an aggregate of nearly $16.7 million in compensation. About 482,00 active accounts were covered in that group.
The activist group called Allied Progress also received a copy of the report following a Freedom of Information Act request.
Karl Frisch, executive director of Allied Progress, charged that the Department of Education is doing nothing to address the fees at some banks, such as Wells Fargo.
Last week, the U. S. Senate confirmed Kathleen Kraninger as the next head of the Consumer Financial Protection Bureau. She replaces the controversial interim director, Mick Mulvaney, who took over after Richard Cordray stepped down in November 2017. Cordray ran unsuccessfully for Ohio governor.
Contact Susan Tompor: stompor@freepress.com or 313-222-8876. Follow Susan on Twitter @Tompor<\/p>\n