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Debit-card fees burden students, GAO cautions

Many college debit cards double as student identification.

1998 Globe file

Many college debit cards double as student identification.

WASHINGTON — Small fees add up for college students who hold college-issued debit and prepaid cards, which are often used to draw financial aid, and congressional investigators on Thursday urged greater oversight of their use.

Such cards are becoming more common on campuses and sometimes double as student ID cards. They are popular with both administrators and students because of the convenience, but using a third-party financial provider can also save colleges money as they distribute financial aid or make tuition refunds.

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The Government Accountability Office said the fees generally are similar to what other debit cards charge. But, it said, some students end up with out-of-network ATM fees, and some cards charge a fee if a student enters a PIN number to receive money instead of signing to get cash back.

It’s unclear how much money is garnered from these fees, but Federal Deposit Insurance Corporation staff members told the GAO it has received complaints from students about fees ranging from hundreds of dollars to more than $1,000, the report said.

The GAO says contract terms between colleges and financial institutions should be more transparent. Students are supposed to have convenient access to aid money, and GAO asked the Education Department to define what that means. It also called on the department to ensure students know all their banking options. Education Department officials said they agree with the recommendations. The department has convened a rule-making session to address the issue.

The National Association of College and University Business Officers has issued ‘‘best practices’’ guidance to colleges and universities that encourages them to keep students’ interests first, to negotiate low- or no-fee financial services, and to make agreements transparent.

In the report, the Consumer Financial Protection Bureau notes that in one survey, 69 percent of schools said they already make available their arrangements with financial companies, spelling out terms of the partnership between the school and the company servicing the debit or prepaid card. But the bureau said students can have difficulty finding that information.

A 2009 law requires credit card companies to disclose relationships with colleges and universities. The law does not cover college-issued debit or prepaid cards, according to the bureau.

Two Democrats, Senator Tom Harkin of Iowa and Representative George Miller of California, called it troubling that students can see a dent in the amount of aid because of card fees.

The deals are “great for banks and great for colleges but can be terrible for students,” Miller said.

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