Are Students Getting the Best Deal From University Financial Products?
The Consumer Financial Protection Bureau (CFPB) launched an inquiry today into the impact of financial products marketed to students through colleges and universities.
These types of products include student ID cards that double as debit cards, school-affiliated bank accounts and cards used to access student loan and scholarship funding.
Many students on campuses across the country are familiar with these products and use them frequently. The CFPB wants to find out, however, if these products and the agreements that back them between financial institutions and universities are truly in the best interest of students. The independent bureau within the Federal Reserve System works to empower consumers with information they need to make financial decisions in their best interest.
Though the Credit CARD Act of 2009 (CARD Act) mandated that agreements between credit card companies and institutions of higher education be subject to public disclosure, there are other unregulated methods credit card companies can use to get their financial products into student's hands.
In a nutshell, Student Loan Ombudsman for the CFPB Rohit Chopra, explained to Campus Progress that the CARD Act "ends freebies" by credit card issuers when they advertise credit cards on college campus. The mandate also requires that people under 21 demonstrate that they're able to repay the debt they rack up. "Credit card companies," however, Chopra said, "can still market to students through social media and other means."
The bureau published a Notice and Request for Information today in regards to other types of financial products marketed to students. CFPB seeks feedback from students, families, financial institutions and the higher education community. The public can submit comments through March 18 on the bureau's website.
Though as of right now, it's too early to tell which financial products are riskier than they are rewarding for students and their families, Chopra advised using the comparison shopping approach: "In general, when you're paying more for the school-endorsed product than you are with products and services off-campus, that could be a red flag," he said. "It's important for students to shop and know they have options.
Until a final report is released, students can reference the CFPB guide on how to choose a credit card or checking account as well as reference the the bureau's database of college credit card agreements.
If the CFPB finds widespread issues with any of the financial products marketed to students it could use the information from this inquiry to issue new industry guidance or rules to protect student consumers.
It might even be a piecemeal solution to help mitigate the student debt crisis, Chopra said. "Getting a good deal and avoiding fees can potentially lead to less student loan debt and less stress from financial pressures."
Lydia is the Journalism Network Associate with Campus Progress.
Naima Ramos-Chapman is an associate editor at Campus Progress.