GAO Recommends Tougher Laws to Protect Students - Legal News


ADVERTISING DISCLOSURE: is an independent, advertising-supported web site. receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » News » Legal » GAO Recommends Tougher Laws to Protect Students

GAO Recommends Tougher Laws to Protect Students

GAO Recommends Tougher Laws to Protect Students
The content is accurate at the time of publication and is subject to change.

The recent wave of agreements between colleges and non-bank providers of prepaid card services to market these products to students has sparked a call for more stringent laws and regulations. According to a recent report by the Government Accountability Office (GAO), as the number of agreements has grown, questions have arisen over fees and other issues.

“These college cards provide students with debit or checking account services, but also can serve as student identification cards or be used to deliver student aid,” the GAO says. One of the primary concerns identified is fees that students can incur when accessing federal student aid–which in 2012 was near $142 billion in grants and loans to 15 million students.

Three issues targeted

The GAO report notes that benefits of the cards can include convenience for students and cost savings and efficiencies for schools. But three areas should be addressed.

The first is fees. GAO found that while some college card fees were higher than those of credit unions, most fees were comparable with those for similar products provided by banks. However, two large providers charged a fee for card purchases using a PIN rather than a signature, a practice not usually employed by mainstream debit cards.

Fee-free ATM access

ATM access is another concern.  Department of Education regulations for college cards require schools ensure convenient access to fee-free ATMs or bank branches for students receiving federal student aid payments, but have no specifics about what this level of access entails which could cause students to run up unnecessary fees when making cash withdrawals of federal aid.

The third concern is neutrality in marketing cards as a payment option for students because some schools receive payments from card providers based on the number of accounts or transactions. GAO found some schools or card providers seemed to encourage students to choose the college card instead of presenting all options so they could make the most informed choice.

Ensuring an informed choice

The GAO report recommends Congress consider requiring providers of debit and prepaid card services for colleges to file their agreements for public review and provide other relevant information.

Additionally, the Department of Education should spell out what constitutes convenient access to ATMs or bank branch offices for students receiving federal student aid funds, and create requirements for schools and card providers to ensure students receive neutral information about their options for receiving federal student aid funds.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:

Related News:

Chase Adopts New Fee Disclosure
Chase Adopts New Fee Disclosure

Posted: March 11, 2014

People applying for a Chase Liquid prepaid card are the first to get a peek at the new disclosure form that aims to make terms and conditions clearer and fee schedules easier to understand. Continue reading

Visa Ups the Ante for Prepaid Cards
Visa Ups the Ante for Prepaid Cards

Posted: June 13, 2014

It’s easy to unknowingly rack up fees when you’re using prepaid cards, but Visa aims to change all that by rolling out new standards for cards carrying its logo. Continue reading

Credit Cards Continue To Rally
Credit Cards Continue To Rally

Posted: June 08, 2015

Across the board U.S payment cards of all kinds continue to be hot with consumers last year, according to a new study. But when push came to shove, credit cards outperformed debt and prepaid cards. Continue reading

Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, and more up to the quarterly maximum, each time you activate.
For Excellent, Good Credit
INTRO OFFER: Discover will match ALL the Miles you've earned at the end of your first year, automatically. For example, if you earn 30,000 Miles, you get 60,000 Miles. That's $600 towards travel!
For Excellent, Good Credit
Earn unlimited 1.5% cash back on every purchase, every day
For Average, Fair, Limited Credit
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!