TO: Negotiators

FROM: Carolyn Fast / Barmak Nassirian 

RE: Protecting Students from Junk Fees when Banking on Campus

34 CFR § 668.164 Disbursing funds.

... 

(e) Tier one arrangement.

(1) In a Tier one (T1) arrangement— 

(i) An institution located in a State has a contract with a third-party servicer under which the 

servicer performs one or more of the functions associated with processing direct payments of title 

IV, HEA program funds on behalf of the institution; and

(ii) The institution or third-party servicer makes payments to— 

(A) One or more financial accounts that are offered to students under the contract;

(B) A financial account where information about the account is communicated directly to 

students by the third-party servicer, or the institution on behalf of or in conjunction with the 

third-party servicer; or

(C) A financial account where information about the account is communicated directly to 

students by an entity contracting with or affiliated with the third-party servicer.

(2) Under a T1 arrangement, the institution must— 

(i) Ensure that the student's consent to open the financial account is obtained before an access 

device, or any representation of an access device, is sent to the student, except that an institution 

may send the student an access device that is a card provided to the student for institutional 

purposes, such as a student ID card, so long as the institution or financial institution obtains the 

student's consent before validating the device to enable the student to access the financial 

account;

(ii) Ensure that any personally identifiable information about a student that is shared with the 

third-party servicer before the student makes a selection under paragraph (d)(4)(i) of this section— 

(A) Does not include information about the student, other than directory information under 34 

CFR 99.3 that is disclosed pursuant to 34 CFR 99.31(a)(11) and 99.37, beyond— 

(1) A unique student identifier generated by the institution that does not include a Social 

Security number, in whole or in part;

(2) The disbursement amount;
(3) A password, PIN code, or other shared secret provided by the institution that is used to 

identify the student; or

(4) Any additional items specified by the Secretary in a notice published in the FEDERAL 

REGISTER; 

(B) Is used solely for activities that support making direct payments to the student and not for 

any other purpose; and

(C) Is not shared with any other affiliate or entity except for the purpose described in paragraph 

(e)(2)(ii)(B) of this section;

(iii) Inform the student of the terms and conditions of the financial account, as required under 

paragraph (d)(4)(i)(B)(2) of this section, before the financial account is opened;

(iv) Ensure that the student— 

(A) Has convenient access to the funds in the financial account through a surcharge-free 

national or regional Automated Teller Machine (ATM) network that has ATMs sufficient in 

number and housed and serviced such that title IV funds are reasonably available to students, 

including at the times the institution or its third-party servicer makes direct payments into the 

financial accounts of those students;

(B) Does not incur any cost— 

(1) For opening the financial account or initially receiving an access device;

(2) Assessed by the institution, third-party servicer, or a financial institution associated with 

the third-party servicer, when the student conducts point-of-sale transactions in a State; and

(3) For conducting a balance inquiry or withdrawal of funds at an ATM in a State that belongs 

to the surcharge-free regional or national network;

(v) Ensure that— 

(A) The financial account or access device is not marketed or portrayed as, or converted into, a 

credit card;

(B) No credit is extended or associated with the financial account, and no fee is charged to the 

student for any transaction or withdrawal that exceeds the balance in the financial account or 

on the access device, except that a transaction or withdrawal that exceeds the balance may be 

permitted only for an inadvertently authorized overdraft, so long as no fee is charged to the 

student for such inadvertently authorized overdraft; and

(C) The institution, third-party servicer, or third-party servicer's associated financial institution 

provides a student accountholder convenient access to title IV, HEA program funds in part and 

in full up to the account balance via domestic withdrawals and transfers without charge, during 
the student's entire period of enrollment following the date that such title IV, HEA program 

funds are deposited or transferred to the financial account; 

(D) The institution, third-party servicer, or third-party servicer's associated financial institution 

does not discriminate between non-Title IV and Title IV funds when assessing any fees, charges, 

or other costs associated with a T1 account; and

(E) No fee is charged to the student for any attempted transaction or withdrawal where the 

institution, third-party servicer, or third-party servicer’s associated financial institution rejects or 

denies such a transaction due to insufficient funds in a T1 account.

(vi) No later than September 1, 2016, and then no later than 60 days following the most recently 

completed award year thereafter, disclose conspicuously on the institution's Web site the 

contract(s) establishing the T1 arrangement between the institution and third-party servicer or 

financial institution acting on behalf of the third-party servicer, as applicable, except for any 

portions that, if disclosed, would compromise personal privacy, proprietary information 

technology, or the security of information technology or of physical facilities;

(vii) No later than September 1, 2017, and then no later than 60 days following the most recently 

completed award year thereafter, disclose conspicuously on the institution's Web site and in a 

format established by the Secretary— 

(A) The total consideration for the most recently completed award year, monetary and nonmonetary, paid or received by the parties under the terms of the contract; and

(B) For any year in which the institution's enrolled students open 30 or more financial accounts 

under the T1 arrangement, the number of students who had financial accounts under the 

contract at any time during the most recently completed award year, and the mean and median 

of the actual costs incurred by those account holders;

(viii) Provide to the Secretary an up-to-date URL for the contract and contract data as described in 

paragraph (e)(2)(vii) of this section for publication in a centralized database accessible to the 

public;

(ix) Ensure that the terms of the accounts offered pursuant to a T1 arrangement are not 

inconsistent with the best financial interests of the students opening them. The Secretary 

considers this requirement to be met if— 

(A) The institution documents that it conducts reasonable due diligence reviews at least every 

two years to ascertain whether the fees imposed under the T1 arrangement are, considered as a 

whole, consistent with or below prevailing market rates; and

(B) All contracts for the marketing or offering of accounts pursuant to T1 arrangements to the 

institution's students make provision for termination of the arrangement by the institution 

based on complaints received from students or a determination by the institution under 
paragraph (e)(2)(ix)(A) of this section that the fees assessed under the T1 arrangement are not 

consistent with or are higher than prevailing market rates;

(C) Such an arrangement prohibits the institution, a third-party servicer, or third-party servicer's 

associated financial institution from imposing a “sunset” fee at any point in the lifecycle of a 

financial account or access device, including, for example, any fee automatically imposed when 

a student graduates or separates, or reaches a specified age; and

(D) Safe Harbor. The Secretary shall presume that the terms of accounts are not inconsistent 

with the best financial interests of the students opening them if the fees imposed under the T1 

arrangement are substantially similar to the fees permitted under the Consumer Financial 

Protection Bureau’s model “Safe Student Account.

(x) Take affirmative steps, by way of contractual arrangements with the third-party servicer as 

necessary, to ensure that requirements of this section are met with respect to all accounts offered 

pursuant to T1 arrangements.

(3) Except for paragraphs (e)(2)(ii)(B) and (C) of this section, the requirements of paragraph (e)(2) of 

this section no longer apply to a student who has an account described under paragraph (e)(1) of this 

section when the student is no longer enrolled at the institution and there are no pending title IV 

disbursements for that student, except that nothing in this paragraph (e)(3) should be construed to 

limit the institution's responsibility to comply with paragraph (e)(2)(vii) of this section with respect to 

students enrolled during the award year for which the institution is reporting. To effectuate this 

provision, an institution may share information related to students' enrollment status with the 

servicer or entity that is party to the arrangement.

(f) Tier two arrangement.

(1) In a Tier two (T2) arrangement, an institution located in a State has a contract with a financial 

institution, or entity that offers financial accounts through a financial institution, under which 

financial accounts are offered and marketed directly to students enrolled at the institution.

(2) Under a T2 arrangement, an institution must— 

(i) Comply with the requirements described in paragraphs (d)(4)(i), (f)(4)(i) through (iii), (vii), and 

(ix) through (xi), and (f)(5) of this section if it has at least one student with a title IV credit balance 

in each of the three most recently completed award years, but has less than the number and 

percentage of students with credit balances as described in paragraphs (f)(2)(ii)(A) and (B) of this 

section; and

(ii) Comply with the requirements specified in paragraphs (d)(4)(i), (f)(4), and (f)(5) of this section 

if, for the three most recently completed award years— 

(A) An average of 500 or more of its students had a title IV credit balance; or

(B) An average of five percent or more of the students enrolled at the institution had a title IV 

credit balance. The institution calculates this percentage as follows:
The average number of students with credit balances for the three most recently completed award 

years

The average number of students enrolled at the institution at any time during the three most recently 

completed award years.

(3) The Secretary considers that a financial account is marketed directly if— 

(i) The institution communicates information directly to its students about the financial account 

and how it may be opened;

(ii) The financial account or access device is cobranded with the institution's name, logo, mascot, 

or other affiliation and is marketed principally to students at the institution; or

(iii) A card or tool that is provided to the student for institutional purposes, such as a student ID 

card, is validated, enabling the student to use the device to access a financial account.

(4) Under a T2 arrangement, the institution must— 

(i) Ensure that the student's consent to open the financial account has been obtained before— 

(A) The institution provides, or permits a third-party servicer to provide, any personally 

identifiable information about the student to the financial institution or its agents, other than 

directory information under 34 CFR 99.3 that is disclosed pursuant to 34 CFR 99.31(a)(11) and 

99.37; 

(B) An access device, or any representation of an access device, is sent to the student, except 

that an institution may send the student an access device that is a card provided to the student 

for institutional purposes, such as a student ID card, so long as the institution or financial 

institution obtains the student's consent before validating the device to enable the student to 

access the financial account;

(ii) Inform the student of the terms and conditions of the financial account as required under 

paragraph (d)(4)(i)(B)(2) of this section, before the financial account is opened;

(iii) No later than September 1, 2016, and then no later than 60 days following the most recently 

completed award year thereafter— 

(A) Disclose conspicuously on the institution's Web site the contract(s) establishing the T2 

arrangement between the institution and financial institution in its entirety, except for any 

portions that, if disclosed, would compromise personal privacy, proprietary information 

technology, or the security of information technology or of physical facilities; and

(B) Provide to the Secretary an up-to-date URL for the contract for publication in a centralized 

database accessible to the public;
(iv) No later than September 1, 2017, and then no later than 60 days following the most recently 

completed award year thereafter, disclose conspicuously on the institution's Web site and in a 

format established by the Secretary— 

(A) The total consideration for the most recently completed award year, monetary and nonmonetary, paid or received by the parties under the terms of the contract; and

(B) For any year in which the institution's enrolled students open 30 or more financial accounts 

marketed under the T2 arrangement, the number of students who had financial accounts under 

the contract at any time during the most recently completed award year, and the mean and 

median of the actual costs incurred by those account holders;

(v) Ensure that the items under paragraph (f)(4)(iv) of this section are posted at the URL that is sent 

to the Secretary under paragraph (f)(4)(iii)(B) of this section for publication in a centralized 

database accessible to the public;

(vi) Ensure that the student accountholder can execute balance inquiries and access funds 

deposited in the financial accounts through surcharge-free in-network ATMs sufficient in number 

and housed and serviced such that the funds are reasonably available to the accountholder, 

including at the times the institution or its third-party servicer makes direct payments into them;

(vii) Ensure that the financial accounts are not marketed or portrayed as, or converted into, credit 

cards;

(viii) Ensure that the terms of the accounts offered pursuant to a T2 arrangement are not 

inconsistent with the best financial interests of the students opening them. The Secretary 

considers this requirement to be met if— 

(A) The institution documents that it conducts reasonable due diligence reviews at least every 

two years to ascertain whether the fees imposed under the T2 arrangement are, considered as a 

whole, consistent with or below prevailing market rates; and

(B) All contracts for the marketing or offering of accounts pursuant to T2 arrangements to the 

institution's students make provision for termination of the arrangement by the institution 

based on complaints received from students or a determination by the institution under 

paragraph (f)(4)(viii)(A) of this section that the fees assessed under the T2 arrangement are not 

consistent with or are above prevailing market rates; 

(C) Such an arrangement prohibits the institution, a third-party servicer, or third-party servicer's 

associated financial institution from imposing a “sunset” fee at any point in the lifecycle of a 

financial account or access device, including, for example, any fee automatically imposed when 

a student graduates or separates, or reaches a specified age; and

(D) Safe Harbor. The Secretary shall presume that the terms of accounts are not inconsistent 

with the best financial interests of the students opening them if the fees imposed under the T2 
arrangement are substantially similar to the fees permitted under the Consumer Financial 

Protection Bureau’s model “Safe Student Account.”

(ix) Take affirmative steps, by way of contractual arrangements with the financial institution as 

necessary, to ensure that requirements of this section are met with respect to all accounts offered 

pursuant to T2 arrangements; and

(x) Ensure students incur no cost for opening the account or initially receiving or validating an 

access device.

(xi) If the institution enters into an agreement for the cobranding of a financial account with the 

institution's name, logo, mascot, or other affiliation but maintains that the account is not marketed 

principally to its enrolled students and is not otherwise marketed directly within the meaning of 

paragraph (f)(3) of this section, the institution must retain the cobranding contract and other 

documentation it believes establishes that the account is not marketed directly to its enrolled 

students, including documentation that the cobranded financial account or access device is offered 

generally to the public.

(xii) Institutions falling below the thresholds described in paragraph (f)(2) of this section are 

encouraged to comply voluntarily with the applicable provisions of paragraphs (f)(4) and (f)(5) of 

this section.

(xiii) Ensure that the institution, third-party servicer, or third-party servicer's associated financial 

institution does not discriminate between non-Title IV and Title IV funds when assessing any fees, 

charges, or other costs associated with a T2 account.

(5) The requirements of paragraph (f)(4) of this section no longer apply with respect to a student who 

has an account described under paragraph (f)(1) of this section when the student is no longer 

enrolled at the institution and there are no pending title IV disbursements, except that nothing in this 

paragraph should be construed to limit the institution's responsibility to comply with paragraph 

(f)(4)(iv) of this section with respect to students enrolled during the award year for which the 

institution is reporting. To effectuate this provision, an institution may share information related to 

students' enrollment status with the financial institution or entity that is party to the arrangement.