A group of 23 Democratic lawmakers wrote to Department of Education Secretary Arne Duncan last week urging the department to take action against universities that encourage students to put federal student aid refunds into costly accounts.
The Department of Education is currently reviewing potential changes to Title IV cash management rules.
Earlier this year, the Government Accountability Office and inspector general for the Department of Education released a report that raised concerns about colleges that partner with financial institutions and encourage students to deposit their refunds in accounts that often carry high and hidden fees.
According to the report, approximately 40 percent of U.S. college students are enrolled in schools that have agreements with financial institutions to market debit cards to students. The report said changes are necessary to address the high fees charged by some institutions and to curb the push for students to opt in to school-endorsed accounts that can often have negative financial consequences.
“Federal financial aid is there to help students,” the lawmakers said in the letter, dated April 22. “When colleges partner with financial institutions and push students into putting their federal student aid refunds into high fee accounts, it puts our federal investment at risk. Students should be able to make unbiased choices about the financial products that work best for them. Colleges should be recommending the financial products that provide the best deal to students, not the biggest financial reward for the institution.”
Specifically, the lawmakers urged the Department of Education to implement rules that would allow students to deposit refunds into personal accounts without delay or penalty, to prohibit universities from partnering with financial institutions that charge fees on student loan aid, to ban revenue-sharing deals at universities and to require schools to post agreements with financial institutions on their websites.