The passing of the Credit Card Act made it difficult for credit card companies to target financially vulnerable college students; but are student loan debit cards a backdoor onto college campuses and into students' wallets? Millions of students are now using debit cards bearing the MasterCard logo and their college emblem to access their student loans. The debit cards are issued by a company called Higher One and with the backing of universities and colleges. Because many students take out loans over the amount they need for tuition so they can pay for food, clothing, housing, books etc, colleges and universities use to issue student loan "refunds" manually. But to save money they have now outsourced this function and many students are required to use this company to receive their student loan money.
Although they technically can have their student loan money issued as a check or to another bank, upwards of 70 percent of students opt to use the Higher One student loan debit card because they feel that they really don't have a choice. But the drawback of using Higher One's student loan debit card is the high fees, according to many students. The student loan debit card has a $19 inactivity fee which is banned on credit cards but not debit cards and they also charge a .50 cent fee if students make a purchase using their pin number instead of a signature, a $2.50 ATM fee for using another banks' ATM and a $20 replacement fee if they lose their debit card.
Many students are complaining that the debit card is slowly eating away at their student loan balance with so many fees. And still others say that eating away at student's loan money is the point of the debit card scheme. Could this type of student loan debit card be just another way for the credit card industry to dip into the wallets of students around the country? It's very possible. We need to make sure that student are protected from student loan debit cards that "kill them softly" with small fees that add up to big losses over time.