Loan Program Plans to Offer Students Prepaid Bank Cards
- 6 years ago
Loan Program Plans to Offer Students Prepaid Bank Cards
“In the absence of strict oversight and safeguards,” they wrote, “these card programs can leave students and taxpayers vulnerable to exploitation.”
And while the solicitation from the Office of Federal Student Aid, known as F. S.A., lays out several restrictions for the financial services providers
that will ultimately run the program, it also explicitly states how they stand to benefit: The payment card, the document reads, “will be the first step in exploring a new, meaningful way to build a stronger, lifetime relationship with F. S.A.’s customers.”
That language set off alarms for consumer advocates, who said the department was offering banks
and card issuers an opportunity to lure in customers while they were young, while pushing the boundaries of what a federal student aid office should be.
The department said students at schools in the program would still be able to receive their money through existing methods — paper checks
and direct deposit into their bank account or onto another prepaid card — if their schools offered those options
The card, for instance, would be a feature within the myStudentAid mobile app, which would allow students
and their parents to complete federal aid applications from a phone and gain access to information about their loans, among other things, according to the document, which was prepared to solicit bids from banks and financial services providers.
Dr. Johnson — a former chief executive officer of First Performance, a card payments company — said students wouldn’t
be asked to provide a one-time blanket permission to be sent solicitations, but instead would be asked case by case.
The Office of Federal Student Aid — the arm of the Education Department
that oversees more than $1.3 trillion in student loans — said it expected to introduce the pilot program as early as late spring.
“In the absence of strict oversight and safeguards,” they wrote, “these card programs can leave students and taxpayers vulnerable to exploitation.”
And while the solicitation from the Office of Federal Student Aid, known as F. S.A., lays out several restrictions for the financial services providers
that will ultimately run the program, it also explicitly states how they stand to benefit: The payment card, the document reads, “will be the first step in exploring a new, meaningful way to build a stronger, lifetime relationship with F. S.A.’s customers.”
That language set off alarms for consumer advocates, who said the department was offering banks
and card issuers an opportunity to lure in customers while they were young, while pushing the boundaries of what a federal student aid office should be.
The department said students at schools in the program would still be able to receive their money through existing methods — paper checks
and direct deposit into their bank account or onto another prepaid card — if their schools offered those options
The card, for instance, would be a feature within the myStudentAid mobile app, which would allow students
and their parents to complete federal aid applications from a phone and gain access to information about their loans, among other things, according to the document, which was prepared to solicit bids from banks and financial services providers.
Dr. Johnson — a former chief executive officer of First Performance, a card payments company — said students wouldn’t
be asked to provide a one-time blanket permission to be sent solicitations, but instead would be asked case by case.
The Office of Federal Student Aid — the arm of the Education Department
that oversees more than $1.3 trillion in student loans — said it expected to introduce the pilot program as early as late spring.