Bank partnerships with colleges and universities may not pay off for students, the U.S. Public Interest Research Group (PIRG) warned in a report published Wednesday.
The consumer group said that students are being pushed into using debit and prepaid cards associated with the campus ID cards, even for student loan disbursements, and are racking up millions of dollars in ATM, overdraft and merchant interchange fees for banks as a result.
"Every penny of financial aid money should go to educational expenses, not an education in high bank fees," Rich Williams, U.S. PIRG's higher education advocate and report co-author, said in a press release on Wednesday.
Financial institutions and colleges have almost 900 relationships affecting more than 9 million students, U.S. PIRG reported. That includes 32 of the 50 largest public 4-year universities, 26 of the largest 50 community colleges and 6 of the largest 20 private not for-profit schools.
U.S. Bank had the most card agreements of all banks, with relationships at 52 campuses serving over 1.7 million students, the report said. Wells Fargo had card agreements at 43 campuses that have over 2 million students.
"While schools are obtaining revenues and reducing costs by outsourcing certain services, the relationships between schools and financial institutions have raised questions because students end up bearing some costs directly — including per-swipe fees, inactivity fees, overdraft fees and more," the report said.
The group also argued that bank relationships with universities may unfairly limit student choice in selecting a bank account.
"When the college has selected a student ID vendor that 'incidentally' offers additional banking services on the college-mascot-embellished card, the student's choices are limited and the student is under the presumption that the college endorses the provider," the report added.