Menendez demands student protections from financial traps

Sen. Bob Menendez (D-N.J.) urged the Department of Education to ensure colleges are not taking advantage of students with financial products.

“Students should not be charged extra fees to access their financial aid funds, whether at account opening or later, and schools should not be steering students towards high-fee products,” Menendez wrote in a letter to Department of Education Secretary Arne Duncan and Consumer Financial Protection Bureau Director Richard Cordray.

ADVERTISEMENT
Menendez said some universities are luring students to open campus banking accounts, then hit them with hidden fees to access their financial aid. More colleges are partnering with banks to offer students prepaid cards loaded with their financial aid credit balance.

“The Department of Education and Consumer Financial Protection Bureau (CFPB) can remedy these problems by requiring clear disclosures of all fees and prohibiting the most abusive fees — especially overdraft — for all prepaid cards and other accounts established in connection with the financial aid process,” Menendez said. “The financial aid system exists for the benefit of students, and students and their parents should have no doubt that school officials are putting the best interests of students first.”

Before the new school year starts, Menendez suggested that Duncan and Cordray make reforms including banning fees, providing protections if the card is lost or stolen and ensuring a student’s financial information remains private.

More in Finance

CFPB urges banks to offer low-risk checking options

Read more »