On January 6, 2012, San Joaquin Delta College announced that as of this spring student aid disbursements will be handed to students via “MySJDCCard.” MySJDCCard is a MasterCard debit card that allows student aid disbursements via an Easy Refund Program (ERP) — a direct deposit system that must be backed by a banking institution. Conveniently MySJDCCard will also provide online bill-pay for the student tuition.
Student Financial Aid
Some may interpret financial aid as free government funds or private grants with no costs attached; however, most financial aid consists of a combination of grants, scholarships, work-study, federal and private loans. Federal and private loans make up the bulk of student debt which accrues interest and requires a payment plan from the graduate. A refund is the amount of financial aid left over from classes paid for the semester. A student may pocket the left-over funds.
In the case of Delta College’s MySJDCcard students may opt to have their own bank or Higher One, INC’s established default account titled “OneAccount.” The OneAccount is insured by Federal Deposit Insurance Corporation (FDIC) and it offers no monthly fees, no minimum balance and financial aid will arrive faster. However, the attractive banking package also comes with fees, such as: inactive account fees, some participants will have overdraft fees, some may have PIN usage fees (debit fee), ATMs will have fees if the card is utilized on out of network ATM machines, and other common bank account fees.
Similar to Higher One, INC, GoldenOne, Bank of America, Wells Fargo and other banking institutions have free college accounts and some offer low, if any, minimum balance requirements. However, other banking institutions may offer a larger selection of their network ATM machines distributed throughout the County.
Colleges — since 2000, more than 700 Colleges have benefited from the bank/ERP services based on the low-cost for managing the student refund. The ERP programs charge less than 0.5% making it attractive for colleges as their budgets benefit from the service.
Students —since 2011, more than 2 million students were enrolled with a promise of faster refund availability.
ERP Program Banking institution —the banks increase their client pool with federal and state funds as well as government and private loan funds. Having the money allows banks the ability to mobilize their money to gain interests and an additional revenue source based on fees from the student accounts. Such fees include ATM fees, PIN fees, overdraft fees, the inactive account fees, and others. The fee revenues would vary depending on users; however, everyone understands that the user, on average, will be young and in many cases they will be holding an ATM/credit card in their hands.
Credit Cards — The credit card company associated with the program gets their name in the hands of a student on a daily basis, creating exposure for their brand. Additionally, there may be a financial benefit to credit card companies through offline usage retailer fees.
Although, MySJDCCard is considered a debit card, the MasterCard component of the card allows the user credit card benefits. Meaning, funds may take 2-3 days to go through their banking institution, and if funds are not sufficient when charged to the card, the bank institution may offer an overdraft protection plan. Overdraft protection is a bank credit loan with hefty penalty fees. In some instances a $5.00 overdraft can result in $35.00 fee, which would equate to a 500% loan interest.
Is it possible that banks are going around the Credit Card Act of 2009 by giving credit cards to students under 21 years of age without a co-signer?
While Jeff Marsee, President of San Joaquin Delta College assured us that, “Higher One has designed the service with website tools that promote responsible money-management habits,” nerdwallet.com calls these programs a “financial aid clearinghouse” that takes financial aid from the poorest students. Ultimately, there is a risk based on inexperienced users that may detract from the goal of financial aid funding. Could this be another form of predatory banking? You be the judge.