COLLEGE DEBIT 

CARDS

Actions Needed to 

Address ATM Access, 

Student Choice, and 

Transparency

Report to the Chairman, Committee on 

Health, Education, Labor, and 

Pensions, U.S. Senate

February 2014

GAO-14-91

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-91, a report to the 

Chairman, Committee on Health, Education, 

Labor, and Pensions, U.S. Senate

February 2014

COLLEGE DEBIT CARDS

Actions Needed to Address ATM Access, Student 

Choice, and Transparency

Why GAO Did This Study

A growing number of colleges and 

universities have entered into 

agreements with financial firms to 

provide debit and prepaid card

services for students. As the number of 

agreements has grown, questions 

have arisen over fees and issues such 

as student choice. This report 

examines (1) the functions of college

cards and the characteristics of

schools and card providers offering the

cards; and (2) benefits and concerns

regarding these cards. GAO reviewed 

relevant federal laws and regulations, 

developed a tally of card agreements 

by reviewing industry reports and 

school and provider websites, and 

analyzed data and interviewed officials 

from federal agencies, banks and other 

financial firms, students, and industry 

and consumer groups. GAO selected 

nine schools (which vary by program 

length and sector) for extended 

interviews and data collection. 

What GAO Recommends

Congress should consider requiring 

that financial firms providing debit and 

prepaid card services to colleges file 

their agreements for public review and

provide other relevant information. The 

Department of Education should (1) 

specify what constitutes convenient 

access to ATMs or bank branch offices 

for students receiving federal student 

aid funds and (2) develop requirements 

for schools and card providers to

present neutral information to students 

about their options for receiving federal 

student aid funds. The Bureau of 

Consumer Financial Protection agreed 

with GAO’s matter for Congress. 

Education agreed with GAO’s 

recommendations to it and said it will 

address these issues in an upcoming 

process to develop new rules.

What GAO Found

At least 852 schools, or 11 percent of U.S. colleges and universities, had

agreements to provide debit or prepaid card services to their students as of July 

2013, and most offered students the ability to receive federal student aid and 

other payments on a card. These schools were disproportionately large; their 

enrollments constituted about 40 percent of all postsecondary students. 

However, the percentage of students enrolled in their schools’ college card 

programs was unknown. In the majority of agreements, the schools also 

outsourced to their card provider the process for paying financial aid and other 

funds via college cards and other methods. Some schools also used college 

cards as student identification. The dominant provider was Higher One, a 

nonbank financial firm that had a 57 percent market share in 2013, as measured 

by number of card agreements. 

Benefits of college cards can include convenience for students and cost savings 

and efficiencies for schools, but concerns exist in a number of areas:

• Fees. GAO found that fees charged by college card providers generally were 

comparable with those for similar products provided by banks, although some 

college card fees were slightly higher than those of credit unions. However,

two large providers charged a fee for card purchases using a personal 

identification number (PIN) rather than a signature—a fee mainstream debit 

cards typically do not charge. The total fees students pay are not known, and 

some providers declined or said they were unable to provide these data to 

GAO. In 2012, Higher One settled with the Federal Deposit Insurance 

Corporation, which alleged unfair and deceptive practices that resulted in 

consumers paying higher fees.

• ATM access. Officials at nine selected schools generally did not report

significant issues with the availability of fee-free automated teller machines 

(ATM) on campus. Although Department of Education regulations for college 

cards require that schools ensure “convenient access” to fee-free ATMs or 

bank branches for students receiving federal student aid payments, the 

agency has not specified what constitutes this level of access. The lack of a 

more specific definition may make avoiding unnecessary fees difficult for 

students when making cash withdrawals of federal aid.

• Neutrality. GAO found instances in which schools or card providers appeared

to encourage students to enroll in a college card rather than present neutral 

information about payment options. The financial marketplace functions best 

when consumers are fully informed and have unbiased information. However, 

schools may have incentives to influence student choice because some 

receive payments from card providers based on the number of card accounts 

or transactions, leading some consumer advocates to question whether 

schools always act in their students’ best interests. Furthermore, the contracts 

between schools and card providers are not publicly available and data on 

these cards are limited, in contrast to another college-related product—affinity 

credit cards bearing the institution’s name or logo—for which key information 

must be disclosed. Increased transparency for college card agreements could 

help ensure that the terms are fair and reasonable for students and the 

agreements are free from conflicts of interest.

View GAO-14-91. For more information, 

contact Alicia Puente Cackley at (202) 512-

8678 or cackleya@gao.gov; or Melissa 

Emrey-Arras at (617) 788-0534 or 

emreyarrasm@gao.gov.
Page i GAO-14-91 College Debit Cards

Letter 1

Background 3

College Cards Are Used for Multiple Purposes and Are Offered by 

At Least 852 Schools 8

College Cards Can Benefit Students and Schools, but Concerns 

Exist about Fees, Student Choice, and Transparency 15

Conclusions 34

Matter for Congressional Consideration 35

Recommendations for Executive Action 35

Agency Comments 35

Appendix I Objectives, Scope, and Methodology 37

Appendix II Comparison of Student Payments by College Cards with Other 

Federal Benefits Distributed by Prepaid or Electronic Benefit Cards 42

Appendix III Comparison of College Card Fees among Providers, Other 

Institutions, and Account Types 45

Appendix IV Federal Provisions Addressing Debit and Prepaid Cards 49

Appendix V Comments from the Department of Education 53

Appendix VI Comments from the Bureau of Consumer Financial Protection 55

Appendix VII GAO Contacts and Staff Acknowledgments 57

Contents
Page ii GAO-14-91 College Debit Cards

Tables

Table 1: Selected Requirements of Department of Education for 

Use of Debit and Prepaid Cards 7

Table 2: Comparison of Selected Account Fees, by Provider Type, 

as of August-September 2013 19

Table 3: Institutions Selected for Extended Review, by Card Type 

and Services Offered 39

Table 4: Description of Selected Federal Program Benefits Issued 

on Prepaid or EBT Cards 43

Table 5: Fees for College Cards, by College Card Provider and 

Type, as of August-September 2013 45

Table 6: Fees for Other Banking Products Available to Students, 

by Provider and Type, as of August-September 2013 47

Table 7: Federal Provisions Addressing Debit and Prepaid Cards 49

Figures

Figure 1: Overview of Process for Paying Financial Aid and Other 

Funds to Students 5

Figure 2: Prevalence of College Card Agreements by Number of 

Schools and Number of Students, as of July 2013 10

Figure 3: Percentage of Schools with College Card Agreements, 

by Sector and Program Length, as of July 2013 11

Figure 4: College Card Providers, by Provider Type, Type of Card 

Offered, and Market Share, as of July 2013 13
Page iii GAO-14-91 College Debit Cards

Abbreviations

ATM automated teller machine

CFPB Bureau of Consumer Financial Protection

EBT electronic benefit transfer

FDIC Federal Deposit Insurance Corporation

FERPA Family Educational Rights and Privacy Act

FTC Federal Trade Commission 

IPEDS Integrated Postsecondary Education Data System

NACUBO National Association of College and University Business 

Officers

PIN personal identification number

PIRG U.S. Public Interest Research Group

SNAP Supplemental Nutrition Assistance Program

TANF Temporary Assistance for Needy Families

WIC Special Supplemental Nutrition Program for Women, 

Infants, and Children

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-14-91 College Debit Cards

441 G St. N.W.

Washington, DC 20548

February 13, 2014

The Honorable Tom Harkin

Chairman

Committee on Health, Education, Labor, and Pensions

United States Senate

Dear Mr. Chairman:

In recent years, a growing number of schools have begun offering 

banking products to their students in the form of debit and prepaid cards 

issued through agreements with financial services providers. These 

college cards provide students with debit or checking account services, 

but also can serve as student identification cards or be used to deliver 

student aid. Some federal agencies, consumer advocacy groups, and 

members of Congress have raised concerns over issues associated with 

college cards, such as the fees students can incur, including when 

accessing federal student aid. In fiscal year 2012, the Department of 

Education (Education) administered federal student aid programs that 

provided about $142 billion in grants and loans to 15 million students.1

In this report, we review issues related to college debit and prepaid card 

agreements, examining (1) the functions of college cards and the 

characteristics of schools and card providers offering the cards, and (2) 

benefits and concerns regarding these cards. To characterize the college 

card marketplace and examine issues surrounding use of the cards, we 

reviewed relevant federal laws and regulations and documentation from 

federal agencies, including Education, the Federal Deposit Insurance 

Corporation (FDIC), the Bureau of Consumer Financial Protection (also 

known as CFPB), and the Board of Governors of the Federal Reserve 

System (Federal Reserve). We also interviewed representatives of these 

agencies. We collected and analyzed information on schools’ agreements 

with college card providers and developed a tally of current card 

agreements by reviewing industry reports, interviewing college card 

providers, and obtaining information from school and provider websites. 

 1

For this report, we define federal student aid programs as financial aid programs 

authorized under Title IV of the Higher Education Act of 1965, as amended (codified at 20 

U.S.C. §§ 1070-1099d and 42 U.S.C. §§ 2751-2756b). These programs include the Pell

Grant Program and the William D. Ford Federal Direct Loan Program.
Page 2 GAO-14-91 College Debit Cards

We also used data from Education’s Integrated Postsecondary Education 

Data System (IPEDS) to analyze the student and institutional 

characteristics of these schools and compare them with the overall 

college and university population. We assessed the reliability of the 

IPEDS data by reviewing documentation about the systems used to 

produce the data and considering our previous use of the data, and we 

determined that the data were sufficiently reliable for our reporting 

purposes.

We selected nine institutions with college card agreements for extended 

interviews and data collection. We selected this nongeneralizable sample 

by focusing on schools with larger enrollments and higher proportions of 

students receiving federal student loans, and included a mix of school 

types (2- and 4-year, public, nonprofit, and for-profit) and geographic 

locations.2

We conducted this performance audit from November 2012 to February 

2014 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

We examined online and paper materials provided to students 

at these nine schools, and we reviewed card agreements from five of 

them, representing about 51 percent of the student population at the nine 

schools. We interviewed student government leaders at five of these 

schools where we could arrange meetings with students. In addition, we 

interviewed representatives of eight banks and financial firms that are the 

largest providers of college cards, composing about 90 percent of the 

market we identified. We reviewed college card contracts and other 

publicly available information on cardholder fees for these eight providers. 

For comparison purposes, we reviewed information on fees for similar 

checking accounts from five other large national banks and average credit 

union account fees published by the Credit Union National Association. 

We reviewed documentation from other federal programs that distribute 

benefits electronically on cards, including those administered by the 

Departments of Labor, Agriculture, Health and Human Services, and the 

Treasury. We also interviewed industry executives and consumer 

advocates. See appendix I for a detailed discussion of our scope and 

methodology.

 2

Nonprofit refers to not-for-profit colleges. Private colleges also can be for-profit, so we 

distinguish between nonprofit and for-profit.
Page 3 GAO-14-91 College Debit Cards

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Schools with college card agreements generally provide students with 

access to either a debit or prepaid card. Each type of card offers a 

cashless means to make purchases and access funds, but there are key 

differences between them.3

• A debit card is issued by a bank and linked to a customer’s checking 

account. It allows the customer to withdraw cash from the account or 

to pay for goods and services. In a debit transaction, the amount of 

the transaction is withdrawn from the available balance in the 

cardholder’s account.

• Prepaid cards appear and function much like a debit card, but are not 

linked to an individual consumer’s bank account.4

Schools can use college cards to make payments to students, such as 

financial aid or tuition refunds when a student withdraws from a class.

Instead, an amount 

is deposited into a pooled account, and withdrawals or purchases are 

made against the predeposited amount. Prepaid cards can be singleuse or reloadable. Both banks and nonbank financial firms issue 

prepaid cards, but banks issue the majority of them, according to 

FDIC.

5

 3

Debit and prepaid cards are distinct from credit cards in that debit and prepaid cards do 

not provide a line of credit. The Credit Card Accountability Responsibility and Disclosure 

Act of 2009 (Credit CARD Act), Pub. L. No. 111-24, 123 Stat. 1734, mandated that GAO 

conduct a separate review of college affinity credit cards—credit cards issued in 

conjunction with a school or school-related organization. § 305(b), 123 Stat. at 1750-51. 

That report is scheduled to be issued in late February 2014.

The majority of financial aid is provided by federal student loan and grant 

programs, although students also can obtain aid from states, school 

4

In this report, we use prepaid card to refer to general-purpose reloadable cards.

5

For this report, we focus on the use of college cards to pay financial aid to students. A 

school may make student payments in other situations, including when (1) other payments 

are credited to a student’s account, such as veterans educational benefits, education 

savings plans, or payments by other parties; or (2) a school’s charges are reduced due to 

changes in a student’s course load, housing, or meal plan, according to the National 

Association of College and University Business Officers. 

Background
Page 4 GAO-14-91 College Debit Cards

grants, and other sources. Federal student aid can be used to pay for 

tuition and fees, room and board, books, supplies, and other living 

expenses. The aid is generally paid directly to the school, which deducts 

its charges, such as tuition and fees. If a student’s total payments from all 

sources, including financial aid, exceed the school’s charges, the school 

pays the difference (also known as a credit balance or credit balance 

refund) to the student. The bulk of the funds paid to students may be 

federal student aid remaining after paying for tuition and fees, and the 

money is intended to help students pay for nonschool items related to 

their education, such as living expenses and transportation costs. Figure 

1 depicts the process for paying financial aid and other funds to students. 

Schools can manage these payments themselves or contract with a third 

party to administer the process.
Page 5 GAO-14-91 College Debit Cards

Figure 1: Overview of Process for Paying Financial Aid and Other Funds to Students

When a school pays federal student aid funds to a student, the process is 

subject to Department of Education requirements, which are aimed at 

ensuring that students receive the funds in a timely and effective 
Page 6 GAO-14-91 College Debit Cards

manner.6

Furthermore, schools that use debit and prepaid cards to pay federal 

student aid funds must follow additional requirements. As shown in table 

1, Education’s requirements focus on ensuring that students have free 

access to federal student aid and are not forced to use a particular debit 

or prepaid card. And if schools contract with a bank or financial firm to 

manage the payment of federal aid to students, Education requires 

schools to ensure that the contractors comply with applicable regulations 

and provisions for federal aid. Education also encourages, but does not 

require, schools to annually disclose a breakdown of the average annual 

costs their students incur in using college cards.

For example, Education requires schools to pay any federal 

student aid funds that exceed the school’s charges directly to students as 

soon as possible, but no later than 14 days after the first day of classes or 

the date the funds were posted to the student’s account (whichever 

occurs later). Schools must pay these funds to students in cash or by 

check or electronic transfer to either a bank account, a checking account

that can be accessed by a debit card, or a prepaid card.

7

 6

Schools are not required to follow federal rules for making payments involving nonfederal 

funds. However, according to the National Association of College and University Business 

Officers, schools generally do so—because they must follow federal rules for federal 

money and because funds from multiple sources may collect in a student account. 

7

See Department of Education, Office of Postsecondary Education, Disbursing or 

Delivering Title IV Funds Through a Contractor, “Dear Colleague” Letter GEN-12-08

(Apr. 26, 2012).
Page 7 GAO-14-91 College Debit Cards

Table 1: Selected Requirements of Department of Education for Use of Debit and 

Prepaid Cards

Feature or 

characteristic Guidance/requirement for school

Student consent Schools must obtain consent from student or parent to open a bank 

account or load funds onto a prepaid card. If student does not 

consent to receiving funds on a debit or prepaid card, school must 

pay the student by cash, check, or electronic transfer to the 

student’s bank account.

Notifications Before the student account is opened, schools must inform 

students of terms and conditions of the account or prepaid card, 

including fees and other costs.

Protections Funds must be held in an insured account (by the Federal Deposit 

Insurance Corporation or National Credit Union Share Insurance 

Fund).

Debit or prepaid cards cannot be marketed or portrayed as credit 

cards and cannot subsequently be converted to credit cards. 

Prohibited fees Schools must ensure students or parents do not incur costs when 

opening accounts or initially receiving debit or prepaid cards to 

access federal student aid funds. 

Access to funds Debit and prepaid cards must be convertible to cash and widely 

usable (institution may not limit use of cards to particular vendors).

Students must have convenient access on (or “immediately 

adjacent” to) campus to branch offices or automated teller 

machines (ATM) of the banks or financial firms with which accounts 

were opened, so that students do not incur fees when making cash 

withdrawals from those offices or ATMs. 

Source: GAO analysis of federal regulations.

Note: In particular, see 34 C.F.R. 668.164(c)(2)-(3); Department of Education, Office of 

Postsecondary Education, Responses to Recent, Recurring Federal Student Aid Questions, “Dear 

Colleague” Letter GEN-05-16 (Oct. 27, 2005).

In addition to Education’s requirements, other federal laws and 

regulations provide consumer protections applicable to all debit and 

prepaid cards. For example, Section 5 of the Federal Trade Commission 

Act prohibits unfair or deceptive acts or practices.8

 8

15 U.S.C. § 45.

The act applies to 

banks, as they are engaged in interstate commerce, and federal banking 

agencies have authority to enforce Section 5 against entities they 

supervise. CFPB has authority to enforce prohibitions on unfair and 

abusive acts against certain institutions and service providers. Regulation 

E, which implements the Electronic Fund Transfer Act, includes 
Page 8 GAO-14-91 College Debit Cards

disclosure requirements and limits on cardholder liability for debit cards 

(but not prepaid cards).9 (For more information on federal protections for 

debit and prepaid card users, see app. IV.) CFPB has authority to enforce 

the Electronic Fund Transfer Act and certain other federal consumer

financial laws against certain institutions and service providers, while 

ensuring that consumers can access financial products and services.

10

CFPB also can issue rules and examine certain institutions.

College cards offer a range of financial services to students, including 

delivering financial aid and making other payments. Of about 7,600 

colleges and universities participating in federal student aid programs, we 

found 852 (11 percent) had college card agreements.11 Because these 

schools were generally larger, their student populations represented 

about 40 percent of total enrollment. However, even when schools have 

college card agreements, not all students participate in their school’s card 

program. One provider, Higher One, had more than half the market for 

college cards.

College cards can be used for different functions, which vary depending 

on the school and the provider:

Financial services. About 80 percent of college card agreements we 

identified were for debit cards, with the remainder for prepaid cards.12

 9

See 12 C.F.R. § 1005.4, § 1005.6. CFPB has issued an advance notice of proposed 

rulemaking as it considers extending Regulation E protections to prepaid cards. See 

Electronic Fund Transfers (Regulation E), 77 Fed. Reg. 30923 (May 24, 2012). According 

to CFPB staff, the rulemaking is expected to conclude in mid-2014.

The 

cards can provide the same functions of standard debit or prepaid cards, 

which include the ability to withdraw funds from an ATM and make 

10CFPB’s enforcement authority is limited; it has primary enforcement authority for 

consumer financial protection laws against large banks and certain nondepository entities, 

but not against smaller banks, which are supervised by the federal banking agencies. 

11We used IPEDS data to calculate the approximate number of colleges and universities 

that participated in federal student aid programs in the 2011-2012 school year.

12In addition to the college cards we describe here, some schools also operate “closed 

loop” systems, in which cards connected to predeposited funds typically can be used for 

payments on campus only, or on-campus and at a limited number of near-campus 

merchants. This kind of card is not the subject of this report.

College Cards Are 

Used for Multiple 

Purposes and Are 

Offered by At Least 

852 Schools

College Cards Can Be 

Used for Several 

Functions
Page 9 GAO-14-91 College Debit Cards

purchases in stores and online. Debit cards link to a standard bank 

account, with check-writing capability and access to services at the 

bank’s branch locations.

Paying Financial Aid and Other Funds to Students. College debit and

prepaid cards can be used to deliver federal student aid or make other 

payments. As part of its card agreement, the school can contract with the 

card provider to administer the student payment process on the school’s 

behalf. Generally, students can elect to have their funds deposited to the 

account associated with their college card, or they can choose to receive 

their funds by direct deposit to another account or in cash or by paper 

check. More than 80 percent of the schools we identified with card 

agreements indicated that students could use their cards to receive 

financial aid and other funds from the school.13

Student ID card. In one-third of schools we identified with card 

agreements, the student’s ID also can be used to access banking

services. In these cases, either the school or the card provider issues 

student ID cards to all students. Students then can choose whether to 

have their ID card also serve as a debit or prepaid card.

By school sector, this 

included 88 percent of public schools with card agreements, 70 percent of 

nonprofit schools, and 100 percent of for-profit schools. (See app. II for a 

discussion of other federal programs that use prepaid or electronic benefit 

cards to provide payments to beneficiaries.)

In our review of industry reports and school and provider websites, and 

our interviews with card providers, we identified 852 U.S. colleges and 

universities with college card agreements as of July 2013, representing 

about 11 percent of all schools participating in federal student aid 

programs.14

 13For our analysis, we relied upon the schools’ descriptions of services provided under 

their card agreements, which we obtained largely from information provided to students on 

the schools’ websites. We did not independently verify the services represented. See 

appendix I for details of our methodology. 

However, schools that have adopted college cards were 

14Because there is no authoritative source for this information, we conducted an extensive 

search to identify schools with agreements. However, all schools with agreements may 

not have been identified through this process. We also excluded from our analysis 13 

agreements for cards that use the school logo but otherwise offer no school-related 

services.

At Least 852 Schools, 

Including Many Large 

Public Colleges, Have 

College Card Agreements
Page 10 GAO-14-91 College Debit Cards

disproportionately large—the enrollment at these schools represented 

about 39 percent of all students at schools participating in federal student 

aid programs (see fig. 2). In particular, 12 of the 20 largest schools by 

enrollment had college card agreements.15

Figure 2: Prevalence of College Card Agreements by Number of Schools and 

Number of Students, as of July 2013

We found card agreements were most common at public colleges and 

universities. About 29 percent of public schools had card agreements, 

compared with 6.5 percent of nonprofit schools and 3.5 percent of forprofit schools. In each school sector, 4-year schools also were more likely 

to have agreements than 2-year or less than 2-year schools (see fig. 3). 

For the student characteristics of age, race, and financial aid status, we 

 15Overall, while schools with student populations of 20,000 or more made up about 3 

percent of all schools, they accounted for about 13 percent of schools that had college 

card agreements. 
Page 11 GAO-14-91 College Debit Cards

found that schools with college card agreements generally were similar to 

schools without agreements.16

Figure 3: Percentage of Schools with College Card Agreements, by Sector and 

Program Length, as of July 2013

 16For example, nonwhite students represented about 44 percent of enrollment at schools 

with agreements and 41 percent at schools without agreements. Similarly, students age 

25 and older represented about 33 percent of students at schools with agreements and 34 

percent at schools without. Schools with college card agreements had a slightly lower 

percentage of students receiving financial aid grants (federal, state, local, institutional, or 

other) than schools overall, and the average amount of aid students received was 

somewhat smaller as well. IPEDS data on student characteristics were not available for 

four schools with college card agreements, and we omitted these schools from our 

analysis. 
Page 12 GAO-14-91 College Debit Cards

Comprehensive data are not available on how many students choose to 

enroll in a college card. We found a range of adoption rates among

schools and providers we interviewed. For example, the largest provider 

reported that overall, 43 percent of students receiving financial aid 

payments at its client schools opened debit accounts. However, the 

adoption rate varied considerably by schoolfor example, 20 percent of 

participating students at one school with which we spoke opted to open 

accounts, compared with 75 percent at another school. At some schools, 

officials told us that only students who were expected to receive 

payments were offered cards.17

Our analysis showed that public 2-year schools, or community colleges, 

represented almost half of all schools that used college cards to make 

financial aid and other payments to students. According to the National 

Association of College and University Business Officers (NACUBO), 

community college students are among those more likely to receive a 

financial aid payment because they generally have low tuition and fees to 

deduct from students’ available financial aid funds. In turn, according to 

NACUBO, community college students are more likely to obtain funds 

through a college card than other students. 

Conversely, other school officials told us 

that all students received cards, but students might be less likely to 

activate cards if they did not believe they would receive a payment from 

the school.

As of July 2013, one provider, Higher One Holdings, Inc., held about a 57 

percent share of the college card market, as measured by number of 

agreements between schools and card providers, as well as number of 

students at schools with agreements, according to our analysis. Seven 

other providers, which included bank and nonbank providers, represented 

most of the rest of the market (see fig. 4).18

 17About 65 percent of students receive some form of financial aid. However, Education 

staff told us they do not have information on how many of those receiving aid receive 

financial aid payments in excess of a school’s charges.

18According to CFPB, a nonbank is a company that offers consumer financial products or 

services, but does not have a bank, thrift, or credit union charter and does not take 

deposits.

One Nonbank Financial 

Firm Had More Than Half 

of the College Card 

Market
Page 13 GAO-14-91 College Debit Cards

Figure 4: College Card Providers, by Provider Type, Type of Card Offered, and 

Market Share, as of July 2013

a

In May 2013, Higher One announced the acquisition of Sallie Mae’s Campus Solutions business, 

which includes college card operations.

Higher One, founded in 2000, is a nonbank financial firm that contracts 

with banks to perform the banking functions associated with its college 

cards, which include providing checking accounts, processing wire 

transfers, supplying cash for ATMs, and issuing cards. Higher One 

provides processing and other administrative services, including 

managing customer service, and is responsible for the information 
Page 14 GAO-14-91 College Debit Cards

technology for managing the accounts. For 2012, Higher One reported 

net income of $36.9 million on revenue of $197.7 million, with average 

annual net income growth of 37 percent over the previous 3 years. 

Seventy-six percent of its 2012 revenue derived from accounts opened by 

students and other members of the campus community, including 

accountholder fees and interchange fees.19 Company executives have 

said that interchange revenue accounted for between 40 and 50 percent 

of account revenue through the first three quarters of 2013. The 

company’s other sources of revenue include managing financial aid and 

other student payments for schools, and providing students and parents 

with other financial services. In addition, Higher One receives fees from 

its bank partners based in part on the amount of deposits in student 

accounts that these banks hold. In May 2013, Higher One announced it 

acquired the college card operations of Sallie Mae, which represented 

about 7 percent of the college card market as measured by the number of 

schools with agreements. While Higher One’s main business is college 

cards, it also has been expanding into other school-related areas, such as 

student data analytics.20

The six other providers of college cards among the group of eight we 

identified are:

• U.S. Bank, PNC Bank, Wells Fargo Bank, and Citibank—large 

banks that provide college card services among a number of other 

financial products.

• Blackboard, Inc.—an education technology and services company, 

whose other products include online learning, campus commerce and 

security, and school communication.

 19Interchange fees are paid by a merchant (or an “acquirer”), and charged or received by 

a payment card network, in order to compensate a card issuer for its involvement in an 

electronic debit transaction. (An acquirer is an entity that contracts with a merchant to 

provide settlement for the merchant’s electronic debit transactions over a payment card 

network.) For example, see GAO, Credit Cards: Rising Interchange Fees Have Increased 

Costs for Merchants, but Options for Reducing Fees Pose Challenges, GAO-10-45

(Washington, D.C.: Nov. 19, 2009).

20In August 2012, Higher One acquired the assets of Campus Labs, which provides data 

collection, reporting, and analytics services to institutions of higher education. 
Page 15 GAO-14-91 College Debit Cards

• Heartland Payment Systems, Inc.—a payments processing firm, 

active in credit, debit, and prepaid card processing, which has 

expanded into the college card marketplace.

Like Higher One, Blackboard and Heartland use bank partners. Higher 

One and some other providers said they have been seeking to expand 

the number of schools with which they have college card agreements. 

Some of the companies also noted they have been expanding their 

offerings—for example, by adding the option of prepaid cards in addition 

to debit cards, or by offering to administer a school’s process for making 

financial aid and other student payments.

Benefits of college cards can include administrative savings for schools 

and added convenience of use for students. In general, college card fees 

were not higher than those associated with other banking products 

available to students. The largest card provider’s practices in charging 

fees, however, were the subject of an FDIC enforcement action in 2012, 

which resulted in a settlement without admission of a violation of law. In 

addition, other concerns with college cards include students’ access to 

no-fee ATMs, schools’ influence over students’ banking and payment 

choices, potential conflicts of interest for schools, and the lack of 

transparency surrounding card agreements.

School officials and college card providers cited several benefits to 

schools of entering into college card agreements:

• Electronic payment of funds. Several schools told us they 

contracted with a college card provider primarily because they wanted 

to reduce expenses by paying funds electronically rather than by 

paper check, or to avoid the expense of developing an electronic 

system internally. Processing paper checks is costly and laborintensive, according to school officials, with one school official 

estimating that it cost upwards of $25 to issue a paper check. Paper 

checks are also vulnerable to fraud because they can be altered or 

stolen.

• Lower administrative costs. Even if schools have the internal 

capability to process funds electronically, college card providers can 

do so more cheaply, or at no expense to the school, according to card 

providers and some schools. Although card providers may charge 

schools for student payment services, officials from two schools told 

College Cards Can 

Benefit Students and 

Schools, but 

Concerns Exist about 

Fees, Student 

Choice, and 

Transparency

Benefits of College Cards 

Include Reducing School 

Costs and Offering 

Students Banking Options
Page 16 GAO-14-91 College Debit Cards

us the cost under their card agreements was still less than half what it 

would be to process the same transactions internally. For example, 

officials at one school estimated the school saved about $0.75 on 

each check and $0.15 on each direct deposit by contracting with a 

provider. These small per-transaction differences can produce 

significant savings for schools administering many transactions each 

year. At one of the six schools we reviewed that contracted with a 

card provider to manage student payments, the card provider 

administered the process at no cost to the school.21

• Improved student ID cards. College cards can allow schools to 

expand the functionality, or defray the cost, of their student ID cards. 

For example, one school said the electronic building access provided 

by its college card improved security because the previous ID card 

could be altered easily and students were able to access buildings 

simply by showing the card. One college card provider also said it has 

helped schools defray the cost of student ID programs by providing 

free card stock for printing the ID cards.

• Revenue generation. As discussed later in this report, some college 

card agreements include payments from card providers to schools—

for example, based on student account activity—or provide other 

benefits, such as administering student payments for schools at 

nominal rates.

• Reduced use of cash on campus. Some schools prefer the use of 

college cards at the campus bookstore and other campus locations 

because they find card transactions cheaper and more convenient to 

manage than cash transactions, according to one card provider.

College cards also can benefit students, according to students, school 

officials, and card providers we interviewed. Benefits they cited include 

the following:

• Access to banking services. College cards provide a way to enter 

the mainstream banking system for students who do not have bank 

accounts. Evidence suggests that some college students are 

unbanked—that is, they do not have any kind of bank or other deposit 

 21Although several schools cited benefits from contracting out their student payment 

process, some schools told us they did not want to outsource the process, either to 

maintain control or because they believed they already were operating efficiently.
Page 17 GAO-14-91 College Debit Cards

account at an insured depository institution.22 These students may 

rely on alternative financial providers, such as check cashing services 

and payday lenders, that have higher costs and lack consumer 

protections available with a traditional bank account. For example, 

officials at one school estimated that about 300 of their nearly 15,000 

students were unable to get a traditional bank account.23

• Multipurpose convenience. When banking services are linked to a 

student ID card, students may benefit from using a single card for 

school and banking functions, such as campus building access, library 

book checkout, ATM use, or purchases.

• Quicker access to funds. When schools outsource the process for 

making financial aid and other payments to a card provider, students 

can get their funds faster, according to card providers and schools. 

Card providers and school officials told us that funds are usually 

available on college cards the same day the school releases funds to 

the provider, compared with availability in 2-3 business days for direct 

deposit to another account, or 5-7 business days for a paper check.24

Students generally want to get their funds as quickly as possible, 

according to students and school officials we interviewed, because 

they can face large expenses at the beginning of a term for rent, 

textbooks, and other college costs.

• Financial education. Some college card providers offer financial 

education and budget tools that can help students manage their 

finances. For example, officials at one school said their college card 

provider offered on-campus financial education sessions for students, 

 22FDIC estimated that 17 percent of householders aged 15-24 were unbanked in 2011, 

although the percentage may be lower for college students because householders with a 

high school degree or some college education were less likely to be unbanked. See 

Federal Deposit Insurance Corporation, 2011 FDIC National Survey of Unbanked and 

Underbanked Households (Washington, D.C.: September 2012).

23For example, some banks will not open new accounts for individuals with a history of 

overdrafts on prior bank accounts.

24According to card providers, funds are available on college cards on the same day the 

school transfers funds because the funds can be deposited immediately into the 

cardholder account. Direct deposits into another bank account take longer because the 

transaction must be processed through the Automated Clearing House network and the 

receiving bank must verify the funds. Paper checks take the longest because they must be 

prepared, mailed to students or picked up, and cleared by the student’s bank.
Page 18 GAO-14-91 College Debit Cards

while officials at another school noted their card provider gave 

students online breakdowns of their spending. One provider has given 

grants for on-campus financial literacy efforts.25

Most of the college card fees we reviewed generally were not higher, or in 

some cases were lower, than those associated with a selection of basic 

or student checking accounts at national banks.26

 25As we have noted, although financial education efforts by the private sector can be 

beneficial, they also can raise concerns about the objectivity of the information provided. 

See GAO, Financial Literacy: Enhancing the Effectiveness of the Federal Government’s 

Role, 

In particular, college 

card accounts generally did not have monthly maintenance fees, while 

the basic checking accounts we reviewed typically did (see table 2). 

College card fees for out-of-network ATM use, wire transfers, and 

overdrafts also were generally comparable with those of banks’ basic and 

student checking accounts. However, fees charged by credit unions 

typically were the same or lower than those charged by college cards. In 

addition, college card fees are likely lower than those of alternative 

GAO-12-636T (Washington, D.C.: Apr. 26, 2012); and Financial Literacy: A Federal 

Certification Process for Providers Would Pose Challenges, GAO-11-614 (Washington, 

D.C.: June 28, 2011). 

26We reviewed fee schedules for college cards from eight providers that together 

accounted for about 90 percent of the market we identified—Blackboard, Citibank, 

Heartland, Higher One, PNC, Sallie Mae, U.S. Bank, and Wells Fargo. We compared 

college card fees for account maintenance, ATM transactions, overdraft, account 

inactivity, debit transactions using personal identification numbers (PIN), and wire 

transfers with fees for banking products that a student might use as alternatives to college 

cards. We use “student checking” to refer to checking accounts specifically intended for, 

or targeted at, students, but not obtained through a college card agreement. We obtained 

the fee information in August and September 2013.

Most College Card Fees 

Are Comparable to Similar 

Bank Products; PIN Fees 

and ATM Access Are 

Concerns and Total Fees 

Paid Are Unknown

Fees Generally Comparable to 

Those Other Institutions 

Charge, Except for PIN 

Transactions
Page 19 GAO-14-91 College Debit Cards

financial services, such as check-cashing services, that some students 

without bank accounts might otherwise use.27

Table 2: Comparison of Selected Account Fees, by Provider Type, as of AugustSeptember 2013

See appendix III for more 

detailed information on our fee comparison analysis.

 27For additional information on the use of alternative financial services, see Federal 

Deposit Insurance Corporation, 2011 FDIC National Survey of Unbanked and 

Underbanked Households (Washington, D.C.: September 2012).
Page 20 GAO-14-91 College Debit Cards

a

Based on survey responses from 1,100 credit unions. Median fee amounts are based on credit 

unions that charged a particular fee. When the majority of credit unions did not charge a specific fee, 

the median amount is reported as $0. See Credit Union National Association, 2013-2014 Fees 

Report. Fee information on outgoing wire transfers is from the Credit Union National Association’s 

2011-2012 fees report because this fee information was not reported in the 2013-2014 report.

b

Higher One’s basic account has no monthly fee. The company also offers students two other 

account options, which charge monthly fees of up to $5.95 but, among other things, do not charge 

PIN fees or fees on certain ATM withdrawals. Sallie Mae also had charged a $4.95 monthly 

maintenance fee for its prepaid college card but sold its student card operations to Higher One in 

2013. PNC also changes a $5 monthly fee for its prepaid college card, but this card is only offered at 

two institutions. PNC does not charge students a monthly maintenance fee for its more common debit 

college cards.

c

According to the Federal Reserve, an overdraft for a debit card account can occur when an 

accountholder writes a check or makes an automatic bill payment or other electronic payment for an 

amount greater than the balance in the account.

One area where college card fees can exceed those of traditional bank 

accounts is for purchases made using a personal identification number 

(PIN). Two college card providers—Higher One and Citibank, which 

together represent about 60 percent of the market—charge $0.50 for 

transactions that use PINs rather than signatures.28 No basic or student 

account that we reviewed for comparison purposes charged a transaction 

fee for using the account’s debit card. Approximately one-third of all PIN 

transactions are for less than $15, according to the Federal Reserve, 

which can make a $0.50 fee a significant cost relative to the amount of 

the transaction. While students can avoid the fee by authorizing their 

purchase using a signature rather than a PIN, the signature option 

involves using a keypad option labeled “credit,” which may be confusing 

because the card is a debit card and not a credit card.29

 28The Higher One fee for PIN transactions is for its basic account. Interchange fees vary 

based in part on whether a transaction is authenticated by PIN or signature. Under current 

debit rules, depending on the size of the bank involved, signature transactions can provide 

higher interchange revenue. For example, because Higher One contracts with a bank with 

less than $10 billion in assets, the company may receive higher interchange fees for 

signature transactions than for PIN transactions. For more information on interchange fees 

generally, see 

In addition, CFPB 

staff told us that some merchants make selecting the credit option more 

difficult, because debit transactions offer them more favorable 

interchange fees.

GAO-10-45. 

29According to FDIC staff, there may be disadvantages for signature transactions as well. 

For example, a signature transaction may be less secure from fraud than a PIN-based 

transaction.
Page 21 GAO-14-91 College Debit Cards

Some federal officials and students have expressed concerns that college 

card fees are too high. In 2012, as part of its process to consider new 

regulations on debit cards, Education received some comments criticizing 

college card fees for being too high, unnecessary, and reducing the 

amount of student aid available to cover college costs.30 Some public 

comments submitted by students to CFPB in 2013 also complained about 

high fees, including the PIN debit transaction charge.31

Consumer advocates and federal officials also have expressed concerns 

about the extent to which students incur out-of-network ATM charges 

when using their college cards and their ability to access fee-free ATMs. 

As is typical for debit cards in general, all the college card providers we 

reviewed charged no fee for withdrawals from ATMs within that card’s 

network. Providers have charged fees up to $3.00 for withdrawals from 

out-of-network ATMs, with the majority charging $2.50.

CFPB staff 

similarly told us that while college cards in some cases had higher fees 

than other products, they did not appear to offer any more attractive 

features.

32 Additionally, 

operators of the out-of-network ATMs may impose a surcharge of their 

own, which is typically about $2.00.33

The number of in-network, fee-free ATMs available to students with 

college cards varies significantly depending on the school and the card 

One card provider noted that these 

ATM fees can add up, because many college students make frequent 

ATM withdrawals of small sums.

 30Negotiated Rulemaking Committee; Public Hearings, 77 Fed. Reg. 25658, 25659 (May 

1, 2012).

31We analyzed the comments, which were solicited by CFPB in its Request for Information 

Regarding Financial Products Marketed to Students Enrolled in Institutions of Higher 

Education, 78 Fed. Reg. 8114 (Feb. 5, 2013).

32Some card providers indicated that students may access their funds through other 

mechanisms that do not incur fees, such as using the card to make purchases or using 

the cash-back option offered by some retailers, although the latter option may incur a 

$0.50 PIN fee, as noted earlier.

33We estimated the average ATM surcharge fee in 2012 was $2.10. See GAO, Automated 

Teller Machines: Some Consumer Fees Have Increased, GAO-13-266 (Washington, D.C.: 

Apr. 11, 2013). Financial institutions operate ATMs as a convenience to their 

accountholders, who generally do not pay fees to use these ATMs. However, financial 

institutions assess a surcharge when a transaction is made by nonaccountholders, and 

independent ATM operators assess surcharges on most customers. 

Out-of-Network Fees and ATM 

Access Have Been Raised as 

Issues
Page 22 GAO-14-91 College Debit Cards

provider. Our review of nine schools illustrated this variation: one large 

school had 16 in-network ATMs on one campus, while a smaller school 

had one.34 Five of the providers we reviewed also had contracts with ATM 

networks other than their own to provide additional fee-free access to 

students. However, at least one of these providers—Higher One—only 

provides students access to its broader fee-free ATM network if they open 

an account with a monthly maintenance fee, potentially reducing any 

savings realized through the improved ATM access.35

A 2012 report by the U.S. Public Interest Research Group (PIRG), a 

consumer advocacy organization, also asserted that at some schools, 

students may experience lengthy lines at college card ATMs or have 

limited access to ATMs in school buildings that are not open 24 hours a 

day. Officials at eight of the nine schools with whom we spoke generally 

did not indicate that access to in-network ATMs was a significant or 

widespread issue. One school acknowledged that sometimes lines of 20-

40 students formed at the ATM on the first day that funds were paid to 

student accounts. We also found that for one large provider, 5 percent of 

its ATMs were accessible 24 hours a day; however, the provider noted 

that it does not control the hours of the buildings in which the ATMs are 

located.

Education regulations for delivering federal student aid funds on college 

cards require that schools ensure students have “convenient access” to 

ATMs or a branch office where students will not incur any costs making 

cash withdrawals from the bank in which the account was opened.36

 34Students at schools with only one in-network ATM on campus may have access to other 

in-network ATMs near the campus, particularly if it is in an urban setting. 

However, Education has provided a limited definition of what constitutes 

such access—namely, that the branch office or ATMs must be located on 

the institution’s campus, in institutionally owned or operated facilities, or a 

35Higher One waives the $5.95 monthly service fee on its premier account if the 

accountholder deposits $300 or more in funds per month other than financial aid 

payments.

3634 C.F.R. § 668.164(c)(3)(v). Education guidance specifies that the intent of these 

regulations is to ensure that students can make unlimited withdrawals from their oncampus ATMs without incurring a fee. While some students may want to withdraw their 

entire financial aid payment when it becomes available, other students may make smaller 

withdrawals over time. 
Page 23 GAO-14-91 College Debit Cards

location immediately adjacent to and accessible from the campus.37

Although this definition provides some guidance, it does not take account 

of such factors as actual ATM usage patterns or availability. Education 

staff said that a better definition or more specific standards for convenient 

access to fee-free ATMs may be needed, noting concerns that a single 

on-campus ATM may not be sufficient and could result in students 

incurring unnecessary fees. The department announced its intention to 

develop new regulations for college cards in a May 2012 notice, but staff 

told us they had been focusing on other regulatory priorities.38 However, 

in November 2013 Education announced formation of a committee to 

develop proposed regulations on college cards and other issues, with the 

committee scheduled to begin work in February 2014.39

Although college card fee schedules we reviewed generally were not 

higher than those of basic or student checking accounts, little information 

is available on the frequency with which students incur ATM, PIN, and 

other fees, and the total amount of college card fees paid by students is 

unknown. Several college card providers with which we spoke generally 

were unwilling or unable to provide details or a breakout of their fee 

revenues.

Any new 

regulations may address the issue of ATM access and fees, Education 

staff told us.

40

 37See 34 C.F.R. 668.164(c)(3)(v). 

However, one provider with a smaller share of the college 

card market told us that in the specific case of student financial aid 

payments, its experience was that students used 82 percent of such 

funds without incurring fees. Although Education encourages schools to 

disclose annually a breakdown of the average yearly costs incurred by 

their students for using their college cards, none of the schools with which 

we spoke tracked such costs. According to FDIC staff, some students 

have complained of paying aggregate fees ranging from hundreds of 

38See Negotiated Rulemaking Committee; Public Hearings, 77 Fed. Reg. 25658 (May 1, 

2012).

39See Negotiated Rulemaking Committee, Negotiator Nominations and Schedule of 

Committee Meetings—Title IV Federal Student Aid Programs, Program Integrity and 

Improvement, 78 Fed. Reg. 69612 (Nov. 20, 2013).

40For example, one provider told us that data are aggregated in a way that does not allow 

them to identify the fees specifically associated with their college cards and another 

provider said some cardholders are not students (such as faculty). 

Data Unavailable on Total 

Fees Paid
Page 24 GAO-14-91 College Debit Cards

dollars to more than $1,000, but it is unknown whether such fee amounts 

are typical.

Moreover, college card providers and school officials noted that students 

can limit fees by adjusting their behavior. For example, students can 

avoid fees in some cases by choosing to authorize debit transactions 

using a signature rather than a PIN, or by avoiding withdrawals from outof-network ATMs. Card providers and schools also told us that they help 

students avoid card-related fees, such as by e-mailing alerts when 

account balances are running low or encouraging students to avoid PINbased debit transactions. However, there are limitations to any efforts to 

help individuals improve their financial behaviors. Even when given 

appropriate information, consumers may not make the most rational 

financial choices. Behaviors such as procrastination and inertia can 

mitigate against informed choice.41

Recently, the largest college card provider faced an administrative 

enforcement action for its fee-charging practices. In August 2012, FDIC 

announced settlements with Higher One and a former bank partner, The 

Bancorp Bank, for alleged unfair and deceptive practices related to how 

Higher One charged fees for its student debit card account program, 

among other things.42 The settlement required Higher One to change its 

practices for charging fees (for example, limiting the number of insufficient 

funds fees charged on a single day to a single account) and pay 

restitution of about $11 million to approximately 60,000 students.43 FDIC 

also imposed civil money penalties of $110,000 on Higher One.44

 41See 

FDIC 

staff told us the restitution payments were made and that the agency 

continues to monitor Higher One’s compliance with the consent order. 

GAO-11-614.

42FDIC determined that the two companies violated Section 5 of the Federal Trade 

Commission Act by charging student accountholders multiple insufficient funds fees from 

a single transaction; allowing accounts to remain in overdrawn status for long periods and 

allowing these insufficient funds fees to continue accruing; and collecting the fees from 

subsequent deposits to the students’ accounts, typically funds for tuition and other college 

expenses.

43The settlement also required Higher One to not make misleading or deceptive 

representations or omissions in its marketing materials or disclosures and to institute a 

sound compliance management system.

44The settlement also imposed civil money penalties of $172,000 for The Bancorp Bank 

and required it to take certain steps to improve its compliance and risk management, and 

provide FDIC details related to the termination of its relationship with Higher One.
Page 25 GAO-14-91 College Debit Cards

Neither Higher One nor The Bancorp Bank admitted to a violation of law 

in settling the charges.

In addition, Higher One announced in November 2013 that it reached an 

agreement in principle to settle a class action lawsuit for $15 million.45

The company and two of its business partners were named as 

defendants, with students alleging that Higher One misled students by 

marketing its debit card as schools’ preferred method for making financial 

aid and other payments, improperly steered them into depositing funds 

into Higher One accounts, and charged excessive and inadequately 

disclosed ATM and PIN fees. Higher One and the other defendants 

denied that marketing of the Higher One account was deceptive and 

contended that fees were fully disclosed and agreed to by the plaintiffs.

Concerns have arisen over some school and industry practices that can 

influence student options, especially when a college card is not 

necessarily the best option for all students. One issue is whether 

students’ choice to use a college card is unduly influenced by the nature 

of information they receive about the cards. Another is the extent to which 

schools’ decisions to enter into agreements may be motivated by benefits 

the schools receive, rather than the best interests of students. However, it 

is difficult for students and others to assess the influence of financial 

incentives on school behavior due to the lack of transparency for card 

agreements. Federal agencies have been reviewing these and other 

college card issues and may take further action.

According to some school officials and others we interviewed, college 

cards may not be the best product for some students who enter college 

with an existing checking account, or for those who need more 

comprehensive banking services. Students with both a college card and a 

separate account with another bank may find it costly or inconvenient to 

manage both accounts concurrently. For example, officials at one school 

told us that some students with existing bank accounts who choose to 

open a separate college card account can incur fees transferring the 

funds between accounts.

 45The parties have been working to resolve details, and a final settlement agreement 

requires court approval. See Higher One Holdings, Inc., Current Report (Form 8-K),

(Nov. 5, 2013).

Students May Not Be 

Offered Neutral Options; 

Agreements Could Pose 

Conflicts and Are Not 

Always Transparent

College Cards May Not Be the 

Best Option for All Students
Page 26 GAO-14-91 College Debit Cards

Some college card products also provide less robust banking services 

and features than a traditional bank account. At its September 2013 

forum on financial products marketed to college students, CFPB noted 

that some student checking products offered by unaffiliated financial 

institutions have more attractive options than some college cards, such as 

automatic reimbursement of any ATM fee charged by an out-of-network 

ATM operator. Prepaid cards in particular may be limited because they 

may not offer students the ability to write checks, can charge fees for 

making additional deposits, and provide limited access to a full-service 

financial institution. Even full-featured college debit cards can have 

limitations, such as the lack of conveniently located bank branch locations 

near a student’s school or home and unresponsive customer service, 

both of which were cited in public comments received by CFPB.

Although schools cannot require students to use college cards, federal 

officials and consumer advocates have raised concerns about the extent 

to which students have been able to make fully informed choices about 

whether to enroll in the debit or prepaid cards their schools offer. Schools 

and college card providers can affect student choices in several ways:

• School endorsement. Schools can appear to implicitly or explicitly 

endorse their college cards, by virtue of the relationship with the 

provider and co-branding of the card. Many students trust their 

schools and, as a result, may view co-branding as an endorsement 

and an indication their school has negotiated the best terms for them. 

Education staff said anecdotal evidence supports that idea, noting that 

students are more likely to sign up for an account when the debit and 

ID functions are on a single card. Student leaders at four schools with 

whom we spoke noted that such co-branding—such as a school 

picture on cards or provider ATMs on campus—gave the appearance 

of an endorsement by the school or the impression that there is only a 

single provider.

• Exclusivity. Provisions in card contracts that prohibit other financial 

companies from providing services to students on campus can limit 

student choice. Four of the eight card providers with which we spoke 

said that at least some of their agreements with schools include such 

provisions, such as barring other financial services companies from 

Presentation of Card and 

Payment Options Was Not 

Always Neutral, Raising 

Questions about Student 

Choice
Page 27 GAO-14-91 College Debit Cards

locating ATMs or an office on campus or from setting up information 

tables during student orientation.46

• Marketing. Card providers and schools market college cards directly 

to students through various methods, including mailings, on-campus 

presentations, and co-branded websites. Some card providers offer 

marketing assistance or materials to schools. For example, one 

provider told us it prefers assisting the school in developing 

messages, because students pay more attention to the information if it 

comes from the schools. Some contracts also call for schools to use 

“best efforts” to promote and encourage use of the provider’s 

account.47

Our review of marketing materials and other information offered to 

students found variations in the type of information provided to students 

about their financial options. At some schools, students were presented 

with an unbiased presentation of these options. For example, one school 

emphasized that “you have the ability to select the option that is best for 

you,” followed by a factual description of payment options. Some schools 

also recommended direct deposit over their campus card. However, we 

also identified instances in which payment options were not presented to 

students in a clear or neutral fashion, and appeared to encourage 

students to choose the college card over other options. Among these 

instances were the following:

• One provider, on a website on which students can select a method to 

receive financial aid and other payments, displays an option where 

students can immediately select the provider’s account. However, 

students who want to select other options must work through 

additional instructions, in which the provider continues to encourage 

use of its product. While the college card payment option can be 

selected online, an option for deposit to another account requires a 

 46Two college card providers noted that schools sometimes have exclusivity agreements 

with other financial services providers that can affect the college card services—for 

example, one card provider said that at some large public schools, it cannot locate an 

ATM, or have access to students, in areas used for intercollegiate sports because another 

financial institution already secured that exclusive right. 

47Based on information obtained from schools and providers, we did not identify instances 

of cross-marketing, in which providers used student personal information obtained from 

schools to market products other than their debit or prepaid cards, or to share such 

information with third parties for marketing purposes. 
Page 28 GAO-14-91 College Debit Cards

separate and more time-consuming submission of additional 

documentation. The provider told us this requirement is an antifraud 

measure, but the industry organization that oversees such payment 

processing transactions told us deposits to another account can be 

achieved equally well online.48

• One school and its provider, under a website heading of “Why should 

I use the Card?” told students that it “makes everyday life easier on 

and off campus.” The instructions for receiving funds by paper check 

were less prominent and described a separate, multistep registration 

process.

• One school directly recommended its college card over the direct 

deposit alternative and gave guidance to students who already had 

selected direct deposit on how to switch to the card option.

In public comments received by CFPB, some students said they felt 

pressured to sign up for college cards. For example, one student said that 

signing up was “highly encouraged,” both during student orientation and 

when provider representatives appeared on campus. Another described 

being pressured by a provider representative even after saying she did 

not plan to sign up. Had she not researched options, she said, she might 

have been convinced the provider was the only choice. FDIC staff told us 

that given current practices, it may seem to some students that they must

select the school’s college card to receive their funds.

Education guidance on college cards does not currently address the 

marketing of the cards or the extent to which schools must inform 

students about financial aid payment options, although schools are 

required to inform students of the terms and conditions of college cards 

before an account is opened.49

 48An additional option for deposit to another account provides for electronic filing of 

documentation, but requires a 6-day hold on the account, according to the provider. 

CFPB recently issued a consumer 

advisory, reiterating that schools cannot require a particular bank or card 

to access funds, and advising students to shop around and use direct 

49See Department of Education “Dear Colleague” Letter GEN-12-08; 34 C.F.R. § 

668.164(c)(3)(ii).
Page 29 GAO-14-91 College Debit Cards

deposit to an existing account for receiving funds.50

Revenue-sharing agreements appear to be declining, but concerns 

remain that the payments and other benefits schools receive from card 

providers may motivate schools to encourage the use of college cards or 

potentially choose the arrangement that provides the schools the most 

revenue rather than one that provides students the best terms, according 

to federal officials and consumer advocates. These payments from 

providers to schools are generally either a fixed sum or tied to the number 

of card accounts or the number of card transactions students make. In 

addition to direct payments, schools can receive other financial benefits 

from college card providers, such as rent for ATMs located on campus, 

general marketing assistance for the school ID card program, or savings 

on the administrative costs of disbursing financial aid.

FDIC staff also told 

us that requiring a clear and conspicuous affirmative statement that 

students have a choice could enhance student awareness of options. In 

addition, in its best practices recommendations for college cards, 

NACUBO called for “a fair explanation of services [without] misleading, 

biased, or aggressive marketing schemes.”

We did not identify comprehensive information on the number of schools 

with college cards that receive such payments. Three card providers with 

which we spoke did not have revenue-sharing agreements with any of 

their schools. In our review of nine schools, three had agreements with 

card providers that included revenue-sharing based in part on transaction 

activity or the number of students who open card accounts. One school 

told us that it received $13,000 in 2012, based on $10 for each student 

who activated the college debit card. Another school received $137,000 in 

payments from the card provider in 2012, based on a formula that 

included the total balance of student card accounts and the volume of 

card transactions with vendors. (Partially offsetting that, however, was 

$30,000 the school paid the provider for services.) A third school told us it 

has received an average of about $400,000 annually over the life of its 

contract, which is based in part on the number of students who opened 

card accounts.

 50See Bureau of Consumer Financial Protection, Reminder: Accessing Your Scholarships 

and Student Loan Funds, Sept. 5, 2013, accessed Nov. 12, 2013, 

http://www.consumerfinance.gov/blog/reminder-accessing-your-scholarships-and-studentloan-funds/.

Payments to Schools May 

Create Potential Conflicts of 

Interest
Page 30 GAO-14-91 College Debit Cards

In addition, some schools—apart from the nine that we reviewed in 

depth—have more comprehensive agreements with providers for 

activities or financial services in addition to college cards, which can 

provide considerably larger revenue to the schools. For example, one 

large public university has a college card agreement with a national bank 

that includes activity-based revenue sharing. In 2013, the bank was to 

pay a royalty of $34 for each active college card account, or a minimum of 

$1 million annually, according to contract documents.51

Education staff and some card providers said that revenue-sharing 

agreements for college cards have been declining. Reasons for the 

decline include the negative public attention the practice has received and 

the reduced need for providers to offer revenue-sharing as an 

inducement, they said. For example, Higher One recently stated that it 

discontinued revenue-sharing incentives to new customers in November 

2007 and has sought to terminate such provisions in existing agreements. 

As of March 2013, about 5 percent of Higher One’s card contracts with 

schools contained revenue-sharing provisions, which in 2012 paid an 

average of $12,000 per school, the company said.

In addition, the 

school has another agreement with the same bank that provides for $35 

million over 25 years for such things as naming rights for a football 

stadium, advertising, and other sponsorships. Similarly, in 2012, another 

large public university signed a 15-year deal worth at least $25 million 

with another national bank, which includes providing banking services to 

the university, alumni, and staff and faculty, in addition to providing 

college cards.

 51We did not perform an in-depth review of this college card provider’s products because it 

did not meet our criteria for the largest card providers, described in appendix I, but our 

review of fees associated with that provider’s college card student accounts found them 

not significantly different from most college card fees we describe earlier in this report.
Page 31 GAO-14-91 College Debit Cards

Comprehensive information about the terms of agreements between 

college card providers and schools was not available. Neither Education 

nor CFPB collects all college card contracts.52

According to Education staff, the agency currently has the authority to 

require schools to provide it with card contracts, although to date 

Education has not issued a broad request for such contracts. However, 

Education staff said it is uncertain whether the agency has the authority to 

publicly release any contracts it might collect. In addition, it is unclear 

whether Education has the authority to request schools’ contracts in 

cases where the card provider does not administer financial aid 

payments, which is the case at three of the large schools included in our 

review, as well as at many other schools with college card agreements.

Some providers with which 

we spoke noted that they consider the contracts with schools to be 

proprietary or confidential, but in some cases the card issuers provided us 

with “template,” or generic, contracts that omitted the terms specific to an 

individual school. Among the nine schools we reviewed, five provided us 

with copies of their contracts.

53

 52According to Education, schools must provide the department with copies of contracts 

they enter into with “third-party servicers,” as outside vendors are known, but only upon 

request. Education staff told us that while the agency collects general information on thirdparty servicers, they do not have the ability to identify college card agreements. CFPB 

staff similarly told us they do not broadly collect information related to the use of the cards 

or the agreements between schools and issuers. CFPB can investigate (through 

supervision, examinations, or enforcement) a report of an unfair or abusive practice, but 

the review would be specific to the facts in the case. As part of an investigation, CFPB 

could examine specific agreements. 

Education staff said the agency also lacks authority to request additional 

information on actual college card costs incurred by students, which could 

be beneficial to both students and regulators. As noted earlier, Education 

currently encourages schools to disclose this information, but none of the 

nine schools included in our review provided this information to students. 

Similarly, in December 2013, CFPB issued an announcement calling for 

voluntary public disclosure by financial institutions of their college card 

agreements and other products marketed to students. The agency noted 

that students and their families should know if schools have a financial 

53See 34 C.F.R. § 668.25(e)(2). Education’s general authority to request college card 

contracts from schools is limited to instances when the contract involves processing any 

aspect of the institution’s participation in federal student aid programs.

College Card Agreements Are 

Not Fully Transparent
Page 32 GAO-14-91 College Debit Cards

incentive to encourage students to use a specific account or card 

product.54

In prior reports, we have cited the value of transparency in such areas as 

improving program outcomes and strengthening oversight.55

Disclosure is required for agreements for another college-related financial 

product—affinity credit cards—and for student loans and lenders. Affinity 

credit cards typically bear the name or logo of the school or organization 

and, in return, the card provider pays a portion of the proceeds of the 

credit card back to the organization. The Credit CARD Act, together with 

implementing regulations, establishes requirements for disclosure to 

federal authorities of the contracts between these card providers and 

school-related entities, plus other key information, such as payments from 

providers.

NACUBO’s 

best practices recommendations call for greater transparency of college 

card agreements, stating that schools should publicly disclose the terms 

of any agreements with third parties issuing college cards to students. 

Some members of Congress also have cited the need for disclosure of 

college card contracts, saying, among other things, that transparency is 

needed to ensure that terms are fair and reasonable for students and the 

agreements are free from conflicts of interest or improper incentives.

56

 54See Bureau of Consumer Financial Protection, CFPB Calls on Financial Institutions to 

Publicly Disclose Campus Financial Agreements, Dec. 17, 2013, accessed Jan. 10, 2014, 

http://

Under the act, the Federal Reserve (initially) and CFPB (most 

recently) have produced reports that summarize the disclosure 

www.consumerfinance.gov/newsroom/cfpb-calls-on-financial-institutions-to-publiclydisclose-campus-financial-agreements.

55For example, see GAO, Troubled Asset Relief Program: Further Actions Needed to 

Enhance Assessments and Transparency of Housing Programs, GAO-12-783

(Washington, D.C.: July 19, 2012); Financial Stability: New Council and Research Office 

Should Strengthen the Accountability and Transparency of Their Decisions, GAO-12-886

(Washington, D.C.: Sept. 11, 2012); and Federal Reserve Bank Governance: 

Opportunities Exist to Broaden Director Recruitment Efforts and Increase Transparency, 

GAO-12-18 (Washington, D.C.: Oct. 19, 2011).

56Pub. L. No. 111-24, § 305(a), 123 Stat. 1734, 1750 (codified at 15 U.S.C. § 1637(r)); 12 

C.F.R. § 1026.57. College affinity credit card issuers must submit to CFPB annually, 

among other things, copies of any college credit card agreements to which the card issuer 

was a party during the prior year, the amount of any payments the issuer made to a 

school or affiliated organization under the agreement during the same period, and the 

number of credit cards opened under the agreement during the period. 12 C.F.R. § 

1026.57(d)(2). The schools must disclose publicly any marketing agreement made with a 

card issuer. 12 C.F.R. § 1026.57(b). 
Page 33 GAO-14-91 College Debit Cards

information and make it readily accessible. CFPB maintains a public 

database containing the affinity credit card agreements.57

For student loans, disclosure requirements were enacted in 2008 after 

lenders were found to be improperly offering schools inducements to be 

placed on “preferred lender” lists. To help ensure that schools list lenders 

that offer the best terms and conditions for students, schools that 

maintain a list of preferred lenders must disclose the criteria used to 

select the lenders and the loan terms and conditions, as well as notify 

students that they need not borrow from a lender on the list.58

Education has been considering further regulation to address concerns 

about college cards. After holding public hearings in 2012 and 2013, 

Education announced in November 2013 that it was forming a committee 

to develop proposed regulations on a variety of federal student aid issues, 

including college cards. The committee is scheduled to begin work in 

February 2014.

Similar 

disclosure of college card agreements could allow interested parties to 

review contract provisions and determine whether the agreements pose 

any concerns related to incentives or conflicts of interest.

CFPB issued a Request for Information in February 2013 for topics 

including the structure of college card agreements, the types of financial 

products and services offered to students, and students’ experiences 

using these cards. CFPB received 162 comments from card providers, 

schools, advocacy groups, students, and others. In September 2013, 

CFPB hosted a forum on college cards, at which it presented initial 

findings from its information request and stakeholders presented their 

views on college cards. At the forum, the agency said continuing areas of 

interest included how schools can use their bargaining power to negotiate 

card terms that provide better deals for students than products available 

to the general public; how students can be better equipped to shop for 

services; obstacles schools face when seeking to adopt best practices on 

disclosure of card arrangements; and whether schools have established 

codes of conduct for employees who negotiate card agreements, such as 

 57See www.consumerfinance.gov/credit-cards/college-agreements. The Federal Reserve 

also maintains a database for the years for which it was responsible for the information. 

See www.federalreserve.gov/collegecreditcardagreements. 

5820 U.S.C. § 1094(h)(1)(C).

Federal Agencies Have Been 

Reviewing and Considering 

Further Regulation of College 

Cards
Page 34 GAO-14-91 College Debit Cards

those required for school employees who select preferred student 

lenders. CFPB staff told us they have no specific schedule or outcome 

planned for their college card work, including whether they will propose

any regulations.

College cards may confer benefits to schools and students, but they may 

not be the best option for all students. Financial markets function best 

when consumers are fully informed about financial products and how to 

choose among them, and NACUBO has recommended that schools 

present students with information about their college cards in a neutral 

fashion. However, the information presented at some schools appears 

biased toward encouraging students to choose the college card over 

other options, and Education’s guidance does not address the 

responsibility of schools to provide objective and neutral information to 

students about their financial aid payment options. As a result, some 

students may not be getting information that enables them to adequately 

assess whether a college card best meets their individual needs and 

preferences and is the most cost-effective choice among all options for 

conducting financial transactions and receiving student aid.

On another key issueaccess to fundsEducation’s regulations require 

that college card providers offer “convenient access” to ATMs or a bank 

branch office where students can withdraw federal student aid without 

incurring cost, but the agency has not specified what constitutes this level 

of access. Because of the concerns about access to fee-free ATMs at 

schools with college cards, Education staff have acknowledged that 

further specifying convenient access may be beneficial. As part of its 

recently announced process for developing regulations on a range of 

federal student aid topics, including college cards, Education could 

consider more specific direction on what constitutes convenient access—

possibly including objective measures—which could resolve ambiguity 

and help ensure that students at all schools with college cards would be 

able to readily access student aid funds at no cost.

Although millions of students attend institutions that offer college cards, 

comprehensive information is unavailable on the prevalence of 

agreements between schools and card providers, the terms of those 

agreements, and the experience of students in using college cards. As a 

result, it is difficult for policymakers and regulators to fully understand and 

effectively monitor the growing college card market. With the Credit 

CARD Act, Congress required greater transparency for college affinity 

credit cards, but not for college debit and prepaid cards, which were less 

Conclusions
Page 35 GAO-14-91 College Debit Cards

prevalent at the time. Requiring disclosure of college debit and prepaid 

card agreements and related information, as well as making that 

information easily available, would provide greater transparency about the 

financial relationships between schools and card providers, and could 

help students, policymakers, and regulators identify potential concerns 

about these arrangements.

To help ensure a comprehensive understanding of the agreements 

between colleges and debit and prepaid card providers, Congress should 

consider requiring that providers file these agreements with CFPB for 

public review, and provide other relevant information, such as payments 

between schools and the providers and fees charged to students, and 

that Education provide reasonably prominent notice of the availability of 

such information.

To help ensure that students can make an objective choice about whether 

to use a college card selected by their schools and have free and 

convenient access to federal student aid funds, the Secretary of 

Education should take the following actions:

• In consultation with CFPB, develop requirements that schools and 

college card providers present students with objective and neutral 

information on their options for receiving federal student aid 

payments.

• Provide a specific definition for what constitutes convenient access to 

ATMs or branch offices of debit and prepaid card providers where 

students will not incur costs in making cash withdrawals of federal 

student aid.

We provided a draft of this report to the Department of Education, the 

Bureau of Consumer Financial Protection, and the Federal Deposit 

Insurance Corporation. Education and CFPB provided written comments,

which are reproduced in appendixes V and VI. In its written comments, 

Education concurred with our recommendations to the agency. Education

reiterated that, as part of its upcoming process to develop proposed 

regulations for federal student aid programs, it is convening a committee 

that will discuss, among other things, the meaning of “convenient access” 

and potential requirements for schools and card providers to present 

students with information on federal student aid payment options. In its 

Matter for 

Congressional 

Consideration

Recommendations for 

Executive Action

Agency Comments
Page 36 GAO-14-91 College Debit Cards

written comments, CFPB concurred with our Matter for Congressional 

Consideration, noting that the failure to disclose the nature of college card 

agreements raises potential consumer protection risks. CFPB also said 

that it will continue to monitor the college card market closely and take 

action as appropriate to ensure the law is being followed. Education, 

CFPB, and FDIC provided technical comments that were incorporated, as 

appropriate. We also provided selected relevant portions of the draft to 

other federal agencies mentioned in the report, as well as Higher One, 

and incorporated their technical comments as appropriate.

We are sending copies of this report to other interested congressional 

committees, the Secretary of Education, the Director of the Bureau of 

Consumer Financial Protection, the Chairman of the Federal Deposit 

Insurance Corporation, and other interested parties. In addition, the report 

is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

Alicia Puente Cackley at (202) 512-8678 or cackleya@gao.gov, or 

Melissa Emrey-Arras at (617) 788-0534 or emreyarrasm@gao.gov. 

Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this report. GAO staff who made 

key contributions to this report are listed in appendix VII.

Sincerely yours,

Alicia Puente Cackley

Director, Financial Markets

 and Community Investment

Melissa Emrey-Arras

Director, Education, Workforce,

 and Income Security
Appendix I: Objectives, Scope, and 

Methodology

Page 37 GAO-14-91 College Debit Cards

This report examines (1) functions of college cards and the characteristics 

of schools and card providers offering the cards, and (2) benefits and 

concerns regarding these cards. We focused on debit and prepaid cards 

provided to students through agreements between schools and banks or 

other financial firms. Our review did not include other card arrangements, 

such as “closed loop” systems, in which cards connected to predeposited 

funds typically can be used for payments on-campus, or on-campus and 

at a limited number of near-campus merchants.

We reviewed relevant federal laws and regulations, as well as 

documentation and guidance from federal agencies including the 

Department of Education (Education), the Bureau of Consumer Financial 

Protection (CFPB), the Federal Deposit Insurance Corporation (FDIC), 

and the Board of Governors of the Federal Reserve System (Federal 

Reserve). We interviewed staff from these agencies on topics that 

included their monitoring of college card activity and recent regulatory 

actions and initiatives. We reviewed public comments related to college 

cards that Education received during recent hearings held as part of a 

rulemaking process, and that CFPB received through a public Request for 

Information. We also reviewed debit card complaints submitted to 

Education and information on an FDIC enforcement action involving a 

college card provider. We attended, and reviewed material provided at, a 

CFPB forum on financial products marketed to college students. In 

addition, we reviewed documentation from, and interviewed staff of, other 

federal programs that distribute benefits electronically on cardsthe 

Departments of Labor, Agriculture, Health and Human Services, and the 

Treasury.

To characterize the extent to which colleges and universities have 

entered into college card agreements, and to examine the financial 

services available through these cards, we developed a list of schools 

with agreements. We created this list by reviewing available data from 

sources including industry reports, interviews with college card providers, 

and information obtained from school and provider websites.1

 1

In developing this list, we also identified a small number of agreements for “co-branded” 

debit cards that used the school logo but otherwise provided no services to the school. We 

excluded these agreements from our review.

Our 

creation and analysis of this information took place over several months 

Appendix I: Objectives, Scope, and 

Methodology

Federal Agencies, Laws, 

and Regulations

Data Analysis
Appendix I: Objectives, Scope, and 

Methodology

Page 38 GAO-14-91 College Debit Cards

leading up to and including July 2013. Although we conducted an 

extensive search, we may not have identified all schools with 

agreements.

Using data from Education’s Integrated Postsecondary Education Data 

System (IPEDS), we analyzed the institutional and student characteristics 

of schools we identified as having college card agreements, and 

compared these characteristics with those for schools and students 

overall. IPEDS is a system of interrelated surveys conducted annually to 

gather information from each college, university, and technical or 

vocational institution that participates in federal student aid programs.2

To link the list of schools we identified as having card agreements to 

corresponding school and student characteristic data in IPEDS, we first 

used an automated process to match school names with IPEDS 

institution names. Most names matched successfully, but for the relatively 

few cases that did not, we made the match manually. Four schools from 

our college card agreement list did not match with IPEDS school names 

through either the automated or manual process. We excluded these 

schools from our analysis of student characteristics.

We used IPEDS data for the 2011-2012 school year, the most recent 

available, to report on the following school characteristics: school sector, 

location, enrollment, level of institution (such as 2- or 4-year), and 

percentage of students receiving Pell Grants. We also used the IPEDS 

data to report on the following student characteristics: age, race, and 

average amounts of financial aid received.

Schools may have more than one unit or location. If IPEDS listed each of 

a college’s locations or campuses separately, we counted each as a 

separate school. However, if we identified only a specific campus within a 

particular college system as having a card agreement, and not other 

campuses in the system, we included only the specific campus. 

Additionally, for schools offering online instruction, if IPEDS identified 

them separately, we also counted them separately in our analysis.

 2

The Higher Education Act of 1965, as amended, requires institutions that participate in 

federal student aid programs to report data on enrollments, program completions, 

graduation rates, faculty and staff, finances, institutional prices, and student financial aid. 

See 20 U.S.C. §§ 1070-1099d, 42 U.S.C. §§ 2751-2756b, and 20 U.S.C. § 1094(a)(17).
Appendix I: Objectives, Scope, and 

Methodology

Page 39 GAO-14-91 College Debit Cards

We assessed the reliability of the IPEDS data by reviewing 

documentation about the systems used to produce the data and 

considering our previous use of the data. Based on our assessment, we 

concluded that IPEDS data were sufficiently reliable for our reporting 

purposes.

To complement our data analysis, we selected nine schools with college 

card agreements for extended interviews and data collection. We 

selected this nongeneralizable sample of schools to include a mix of card 

types (debit and prepaid cards) and functions (such as use as 

identification card or for student payments). We selected schools with 

larger enrollments and higher proportions of students receiving federal 

student loans in order to focus on schools distributing larger amounts of 

federal student aid. We also included a mix of program lengths (for 

example, 4-year and 2-year), school sectors (public, nonprofit, and forprofit), card providers, and geographic locations. We interviewed officials 

at each of the selected schools and reviewed key documents including, 

where available, contracts with college card providers, card terms and 

conditions, and online and paper materials provided to students. We also 

interviewed student leaders at five of these schools where we could 

arrange meetings with students. (Table 3 summarizes the characteristics 

of the institutions we selected and the types of cards and card services 

they offer.) Our interviews covered topics including college card features, 

how and why schools decided to enter into card agreements, contract 

terms, card fees, and agreement benefits and concerns.

Table 3: Institutions Selected for Extended Review, by Card Type and Services Offered

Type of card Services offered

School sector and 

program length Enrollment and location Debit Prepaid

Provider-issued 

card serves as 

student ID

School-issued 

student ID 

linked to 

checking

Payment of 

financial aid 

and other funds

Public

4-year

46,000 students

East

X X

Public

4-year

15,000 students

West

X X

Public

4-year

31,000 students

East

X X

Public

2-year

18,000 students

Midwest

X X

Selection of Schools for 

Extended Review
Appendix I: Objectives, Scope, and 

Methodology

Page 40 GAO-14-91 College Debit Cards

Type of card Services offered

School sector and 

program length Enrollment and location Debit Prepaid

Provider-issued 

card serves as 

student ID

School-issued 

student ID 

linked to 

checking

Payment of 

financial aid 

and other funds

Public

2-year

24,000 students

Midwest

X X X

Public

2-year

25,000 students

West

X X

Private, nonprofit

4-year 

74,000 students

East

X X

Private, nonprofit

4-year

5,000 students

East

X X

Private, for-profit

4-year

23,000 students

West

X X

Sources: U.S. Department of Education, school officials.

We interviewed executives of eight banks and financial firms that were 

the largest providers of college cards, together accounting for about 90 

percent of the college card agreements we identified. The eight 

companies were Higher One, Inc.; U.S. Bank; Sallie Mae, Inc.; PNC 

Bank; Wells Fargo Bank; Citibank; Heartland Payment Systems, Inc.; and 

Blackboard, Inc. We reviewed documents obtained from the providers, 

including samples of contracts with schools and marketing materials. We 

also reviewed securities filings, fee schedules, and other publicly 

available information for the eight providers. To compare college card 

fees with fees for similar banking services, we also compiled fee 

information for basic and student checking accounts from five large banks 

(which account for about 30 percent of the market for large commercial 

banks) and for credit unions.3

 3

Student checking accounts here means accounts offered to college students generally, 

and not through a college card agreement.

We reviewed these providers’ fees for 

monthly account maintenance, domestic out-of-network transactions at 

automated teller machines (ATM), overdraft or insufficient funds, 

inactivity, wire transfer, and debit transactions using personal 

identification numbers (PIN). We selected the five large banks based on 

consolidated assets as of June 30, 2013, as reported by the Federal 

Reserve. (The banks we selected were not among the eight largest 

College Card Providers 

and Fees
Appendix I: Objectives, Scope, and 

Methodology

Page 41 GAO-14-91 College Debit Cards

college card providers we identified.) We obtained these banks’ fee 

information in August and September 2013 from information available on 

providers’ websites, and when such information was not sufficient, by 

calling the provider’s customer service line. We designated a bank’s 

checking accounts as basic if they provided standard services such as 

check-writing, debit cards, and access to a bank branch. For credit union 

fee information, we reviewed fees reported in the Credit Union National 

Association’s 2013-2014 Fees Report.

We also obtained information from other relevant parties. This included 

interviews with representatives from industry groups, including the 

American Bankers Association, the Consumer Bankers Association, and 

the Credit Union National Association; consumer advocacy organizations, 

including the National Consumer Law Center and the U.S. Public Interest 

Research Group; higher education associations, including the American 

Student Government Association, National Association of Campus Card 

Users, and National Association of College and University Business 

Officers; two schools that had canceled their college card programs (in 

addition to the nine schools selected for extended review); and four 

financial services providers, including Visa and MasterCard, that 

submitted public comments to CFPB regarding college cards (in addition 

to the eight largest providers). We reviewed documents, reports, and 

other information from these groups, as available.

We conducted this performance audit from November 2012 to February 

2014 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Industry Groups, 

Consumer Associations, 

and Other Sources
Appendix II: Comparison of Student Payments 

by College Cards with Other Federal Benefits 

Distributed by Prepaid or Electronic Benefit 

Cards

Page 42 GAO-14-91 College Debit Cards

We reviewed several federal programs that use prepaid or electronic 

benefit cards to provide payments to beneficiaries (see table 4). Although 

there are some similarities, these card programs generally differ from the 

debit and prepaid cards that some U.S. colleges and universities use to 

pay financial aid and other funds, which can include federal student aid 

funds. Key points of comparison include:

• Administrative structure. The other federal programs we reviewed 

that use prepaid and electronic cards, some of which are run through 

partnerships with state governments, generally distribute aid directly 

to beneficiaries on prepaid and electronic benefit cards that are 

provided through centrally managed agreements between the federal 

or state governments and card providers. In contrast, federal student 

aid is channeled through individual schools, and these schools 

negotiate individual agreements with card providers.

• Scale. Schools with college card programs have student populations 

ranging from less than 1,000 to more than 100,000 students. 

However, other federal programs can be much larger. For example, 

the Department of Agriculture’s Supplemental Nutrition Assistance 

Program (SNAP), formerly known as the Food Stamp Program, had 

more than 46 million participants in 2012.

• Choice of how to receive benefits. The Department of Education 

(Education) prohibits schools from requiring that students use college 

cards, and funds can be paid to students by paper check; electronic 

transfer of funds, such as to a college card or direct deposit to an 

existing account; or in cash. The Department of the Treasury provides 

Social Security beneficiaries with a choice of receiving benefits by 

direct deposit or on a prepaid card, though generally not by paper 

check. For other federal programs, like the Department of Health and 

Human Services’ Temporary Assistance for Needy Families program, 

electronic benefit transfer (EBT) cards are the only way beneficiaries 

can obtain their benefits in most states.

• Card limitations. Education requires that the federal student aid 

funds students receive on college cards be convertible to cash that 

can be used for any purpose. The Department of Labor (Labor) has 

similar requirements for funds provided through Unemployment 

Insurance benefit cards. However, other federal programs may limit 

where and for what items benefit cards can be used. For example, 

SNAP limits EBT card purchases to eligible food items from approved 

retailers.

Appendix II: Comparison of Student 

Payments by College Cards with Other 

Federal Benefits Distributed by Prepaid or 

Electronic Benefit Cards
Appendix II: Comparison of Student Payments 

by College Cards with Other Federal Benefits 

Distributed by Prepaid or Electronic Benefit 

Cards

Page 43 GAO-14-91 College Debit Cards

• Card fees. Similar to Education, other federal agencies we reviewed 

place some limits on card user fees. Each of the programs described 

below requires that card users have at least one opportunity to obtain 

benefits without a fee. SNAP prohibits all card user fees, although 

states may charge a fee for replacement cards.

Table 4: Description of Selected Federal Program Benefits Issued on Prepaid or EBT Cards

Agency/program

Administrative structure and 

benefit options Card usage and limitations Card fees

Department of Agriculture

• Supplemental Nutrition 

Assistance Program 

(SNAP)

• Special Supplemental 

Nutrition Program for 

Women, Infants, and 

Children (WIC)

SNAP and WIC provide nutrition 

assistance to low-income 

individuals and families, and to 

pregnant and postpartum women, 

infants, and children, respectively. 

All states issue SNAP benefits 

solely through EBT cards, and six 

states currently issue WIC benefits 

by EBT statewide. Each state 

selects its own EBT card provider. 

However, the Department of

Agriculture reviews states’ requests 

for proposals to ensure contracts 

meet requirements and are 

awarded through competitive 

processes.

SNAP EBT cards can be used 

only to buy eligible food items 

from approved retailers, and 

WIC EBT card purchases are 

limited to designated packages 

of food. SNAP and WIC 

benefits cannot be accessed 

through automated teller 

machines (ATM).a

Federal law prohibits card fees 

for beneficiaries, except for a 

replacement card fee charged 

by some states.

Department of Health and 

Human Servicesb

Temporary Assistance for 

Needy Families (TANF)

TANF provides cash assistance to 

low-income families. Each state is 

responsible for administering its 

own payment methods and 

selecting an EBT card provider, if it 

chooses. Although some states 

allow recipients to choose among 

payment methods (EBT card, paper 

check), EBT cards are the only 

option in the majority of states.

TANF EBT cards can be used 

to make purchases at retailers 

or withdraw cash at ATMs or 

banks, but federal and state 

rules restrict transactions at 

certain locations, such as 

liquor stores and casinos.c

Recipients must have access 

to benefits with minimal fees or 

charges, including an 

opportunity to access benefits 

with no fee or charges. 

Department of the Treasury

Direct Express card for Social 

Security, Supplemental 

Security Income, and other 

federal benefit programs

Federal regulations require federal 

benefit payments to be made 

electronically. Beneficiaries can 

choose between direct deposit into 

personal bank accounts or the 

Direct Express prepaid card issued 

by Comerica Bank.

Direct Express cards can be 

used to make purchases and 

get cash from ATMs or bank 

locations nationwide that 

accept MasterCard. No 

restrictions on purchases.

No monthly account fees or 

fees on domestic purchases 

(including cash back with 

purchases) or bank 

withdrawals. Customers 

receive one free withdrawal 

from a network ATM with each 

benefit deposit onto the card, 

but are charged $0.90 for each 

additional withdrawal.
Appendix II: Comparison of Student Payments 

by College Cards with Other Federal Benefits 

Distributed by Prepaid or Electronic Benefit 

Cards

Page 44 GAO-14-91 College Debit Cards

Agency/program

Administrative structure and 

benefit options Card usage and limitations Card fees

Department of Labor

Unemployment Insurance 

Unemployment Insurance benefits 

are provided to eligible workers 

who become unemployed through 

no fault of their own. Benefits are 

administered by individual states, 

which determine their distribution 

methods. More than 40 states 

currently issue benefits on cards. 

Cards can be used to make 

purchases and get cash from 

ATMs or bank locations. No 

restrictions on purchases.

Beneficiaries must have at 

least one opportunity to access 

the full amount of the weekly or 

biweekly benefit for free. Other 

fees are determined through 

negotiations between 

individual states and card 

providers. In general, states 

and card providers allow 

unlimited free in-network ATM 

withdrawals, with limited free 

out-of-network ATM 

withdrawals. ATM fees range 

from $0.40 to $2.50 depending 

on the state and whether the 

ATM is in the provider’s 

network.

Source: GAO analysis of agency interviews and documents.

a

For additional information on SNAP EBT cards, see GAO, Supplemental Nutrition Assistance 

Program: Payment Errors and Trafficking Have Declined, but Challenges Remain, GAO-10-956T

(Washington, D.C.: July 28, 2010).

b

The Department of Health and Human Services also administers the Child Care Development Fund 

program. Most payments for this program are made by states directly to child care providers. 

However, two states (Kansas and Utah) currently distribute payments to parents using EBT cards. In 

these cases, parents use the EBT cards to pay their child care providers directly. Because the bulk of 

states do not have this EBT card arrangement, we omit the program from the table.

c

Federal law prohibits TANF assistance from being accessed via any EBT transaction in liquor stores, 

casinos or gaming establishments, and any establishment which provides adult-oriented 

entertainment in which performers disrobe or perform in an unclothed state for entertainment. Middle 

Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112–96, § 4004, 126 Stat. 156, 197–198

(codified at 42 U.S.C. § 608(a)(12)). For more information, see GAO, TANF Electronic Benefit Cards: 

Some States Are Restricting Certain TANF Transactions, but Challenges Remain, GAO-12-535

(Washington, D.C.: July 20, 2012).

Among the federal programs we reviewed, the one most similar to college 

cards was Labor’s electronic distribution of Unemployment Insurance 

benefits. In both cases, beneficiaries have no limits on purchases using 

the card and generally have a choice in how they receive their benefits. 

While neither Labor nor Education negotiates contracts with card 

providers, both agencies impose requirements aimed at ensuring that 

agreements have protections for beneficiaries. For example, both require 

that beneficiaries have an opportunity to access their full benefit without 

incurring a fee. Labor staff told us they have been developing new 

guidance that will likely encourage states to negotiate card agreements 

that minimize fees and offer beneficiaries a choice in how they receive 

benefits. They said they may issue the guidance early in 2014.
Appendix III: Comparison of College Card Fees 

among Providers, Other Institutions, and 

Account Types

Page 45 GAO-14-91 College Debit Cards

To examine the costs of college card accounts, we obtained publicly 

available fee information for college card providers on selected items or 

transactions as of August and September 2013. We also obtained 

publicly available fee information for products similar to college 

cardsbasic and student checking accountsoffered by other financial 

institutions. 

Table 5: Fees for College Cards, by College Card Provider and Type, as of August-September 2013

Card type

Monthly 

maintenance 

fee

ATM out-ofnetwork fee 

(domestic)a

Insufficient 

funds/

overdraft fee

Wire 

transfer feeb Monthly 

inactivity fee

PIN-based 

debit 

transaction fee

Higher One: 

OneAccount

Debit 

$0c $2.50 $29d $25 outgoing $0 $0.50 

Higher One: 

OneAccount Edge

Debit $4.95 $0 $0 Not applicablee $0 $0 

Higher One: 

OneAccount 

Premier

Debit $5.95f $2.50g $29d $25 outgoing $0 $0 

U.S. Bank Debith $0 $2.50 $36i $20 incoming, 

$30 outgoing

$0 $0 

Prepaid $0 $2 Not applicable $0 $2 (after 9 

months of 

inactivity)

$0

Blackboard Prepaid $0 $2.50 Not 

applicable

Not applicable $3.50 (after 

24 months of 

inactivity)

$0

Heartland 

Payment Systems

Prepaid $0 $2 Not applicable $0 $5 (after 24 

months of 

inactivity)

$0 

PNC Prepaid $5 $2.50 $0 $15 incoming, 

$25 outgoing 

$0 $0

Debit $0j $2.50 $36k $15 incoming, 

$25 outgoingl $15 (after 6 

months of 

inactivity)

$0

Wells Fargo Debit $0 $2.50 $0m $15 incoming, 

$30 outgoing

$0 $0

Sallie Maen Prepaid $4.95o $2.50 $0 Not applicablep Not listed Not listed

Citibank Prepaid $0 $3 Not applicable Not listed $3 (after 12 

months of 

inactivity)q

$0.50r

Source: GAO analysis of publically available fee schedules and provider information.

Appendix III: Comparison of College Card 

Fees among Providers, Other Institutions, 

and Account Types

College Cards
Appendix III: Comparison of College Card Fees 

among Providers, Other Institutions, and 

Account Types

Page 46 GAO-14-91 College Debit Cards

Note: Fees shown as "Not applicable" were listed as such in account materials or as described by 

providers.

a

Students also may incur fees from the ATM owner. All out-of-network ATM fees are for domestic 

withdrawals. 

b

The fees are for domestic wire transfers. Some providers also offer alternative, potentially less 

expensive options for transferring money to another account, such as depositing paper checks.

c

Nonstudent accountholders are charged $3.95, which is waived with $100 in direct deposit per 

month. 

d

Higher One will not authorize ATM withdrawals or everyday one-time or recurring debit card 

purchases when the accountholder does not have sufficient funds in the account to cover the 

withdrawal or purchase. Student would be charged $29 for first item and $38 for any subsequent 

item. Higher One does not provide overdraft protection for its checking accounts.

e

OneAccount Edge accountholders cannot perform wire transfers.

f

The fee is waived with $300 in direct deposits each month. 

g

OneAccount Premier accountholders receive one monthly non-Higher One ATM withdrawal fee 

reimbursement.

h

According to U.S. Bank, its debit cards can be attached to any one of U.S. Bank’s checking 

accounts, each with different options and fees. Fees shown here apply to the U.S Bank Student 

Checking account, which the bank said is the most popular account chosen by students. 

i

No fee is charged for items of $5 or less. A $36 fee is charged for items more than $5.

j

No monthly service charge if the customer provides proof of active enrollment in qualifying 

educational institution (expires 6 years after account is enrolled in student banking program). 

k

According to PNC, overdraft fees are waived for the first overdraft.

l

Customers in the Student Banking program enrolled at a designated PNC Alliance or Access school 

continue to receive one free domestic or international incoming wire transfer per statement period.

mIf an accountholder adds Debit Card Overdraft Service and an ATM or everyday debit card 

transaction overdraws the account, a $35 fee will be charged per item. If the accountholder does not 

add the service, the ATM or everyday debit card transaction will be declined and no overdraft fee will 

be charged. 

n

Higher One acquired Sallie Mae’s student card operations in 2013.

o

The charge is waived in any monthly billing cycle when the customer receives a payment, posts 15 

qualifying purchase transactions, or loads at least $1,000 on the card.

p

Sallie Mae’s prepaid card did not accept wired funds.

q

Following a 12-month grace period; an inactive account is defined as any account that has not 

received a payment or completed a withdrawal transaction within 90 days.

r

The first PIN transaction fee is waived per each deposit to the card account.
Appendix III: Comparison of College Card Fees 

among Providers, Other Institutions, and 

Account Types

Page 47 GAO-14-91 College Debit Cards

Table 6: Fees for Other Banking Products Available to Students, by Provider and Type, as of August-September 2013

Account type

Monthly 

maintenance 

fee

ATM out-ofnetwork fee 

(domestic)

Insufficient 

funds/

overdraft fee

Domestic 

wire transfer 

fee Inactivity fee

PIN-based debit 

transaction fee

JP Morgan Chase

Basic $12a $2 $34 $15 incoming, 

$30 outgoingb $0 $0

Studentc $6d $2 $34 $15 incoming, 

$30 outgoinge $0 $0

Bank of America

Basic $12f $2 $35g $12 incoming, 

$25 outgoing 

$0 $0

Student $0h $2 $35g $12 incoming, 

$25 outgoing

$0 $0

Capital One Bank

Basic $8.95i $2 $35 $15 incoming, 

$25 outgoing

$0 $0

Student $0 $2 $35 $15 incoming, 

$25 outgoing

$0 $0

TD Bank

Basic $5.99j $2.50 $35 $15 incoming, 

$25 outgoing

$0 $0

Student $0 $2.50 $0k $15 incoming, 

$25 outgoing

$0 $0

BB&T

Basic $10l $2.50 $0m $15 incoming, 

$24 outgoing

$0 $0

Student $0 $2.50n $0m $15 incoming, 

$24 outgoing 

$0 $0

Credit unions 

(median fees)o $0 $1 $25 

insufficient 

funds fee, $4 

overdraft fee

$15 outgoing, 

$10 incomingp Not available $0

Community banks Comprehensive information not available 

Source: GAO analysis of publically available fee schedules and provider information.

a

The fee is $10 in California, Oregon, and Washington. The monthly service charge can be avoided if 

the customer does any one of the following each monthly statement period: makes direct deposits 

totaling $500 or more into the account monthly; maintains $1,500 minimum daily balance; maintains 

average daily balance of $5,000 or more in any combination of qualifying linked deposits or 

investments; or pays $25 or more in qualifying checking-related services or fees.

b

The domestic outgoing charge is $25 if a transfer is made through chase.com.

c

The account is for college students age 17-24 when proof of student status is provided.

d

No monthly maintenance fee is charged if the customer has done one of the following: enrolled in 

college (up to 5 years); made a direct deposit to the account monthly; or maintained a $5,000 monthly 

average daily balance.

e

The domestic outgoing charge is $25 if the transfer is made through chase.com.

f

The fee is waived if the customer does one of the following each statement period: makes at least 

one direct deposit of $250, or maintains an average daily balance of $1,500 or more.

Other Financial Institutions
Appendix III: Comparison of College Card Fees 

among Providers, Other Institutions, and 

Account Types

Page 48 GAO-14-91 College Debit Cards

g

Bank of America will not authorize ATM withdrawals or everyday debit card purchases when the 

customer does not have sufficient funds in the account. A fee is assessed for scheduled payments 

and checks.

h

A $12 monthly maintenance fee is charged if the accountholder is not enrolled in school or under age 

23.

i

The fee is waived with a $300 minimum daily balance or single monthly direct deposit of $250 or 

more.

j

The fee is $4.95 when customer chooses online statements only.

k

If the accountholder adds overdraft service, a $35 fee is charged per ATM or debit card transaction. 

If the accountholder does not add this service, the ATM or everyday debit card transaction will be 

declined and no overdraft fee charged.

l

The fee is waived with one automated direct deposit of $100 or greater per statement period; $1,500 

average checking balance per statement period; or $6,000 in combined deposit or retail outstanding 

loan balances.

mAccountholders can opt in to overdraft protection, which allows the bank to authorize transactions 

when the account has insufficient funds; they will be charged a fee. If accountholder does not opt in, 

the transaction will be declined and a fee assessed.

n

Student banking accountholders receive four no-fee non-BB&T transactions per statement period.

o

Based on survey responses from 1,000 credit unions. Median fee amounts are based on credit 

unions that charged a particular fee. When the majority of credit unions did not charge a specific fee, 

the median amount was reported as $0. See Credit Union National Association, Fees Report 2013-

2014, conducted from November 2012 through February 2013.

p

Data from Credit Union National Association 2010-2011 survey, because this data element was not 

included in the 2013-2014 survey.
Appendix IV: Federal Provisions Addressing 

Debit and Prepaid Cards

Page 49 GAO-14-91 College Debit Cards

A number of federal laws and regulations can apply to debit and prepaid 

cards. With the exception of education-specific items, these provisions 

apply generally to such cards, and do not specifically address college 

debit and prepaid cards. In general, debit cards have greater consumer 

protections than prepaid cards. Table 7 shows summaries of key 

provisions.

Table 7: Federal Provisions Addressing Debit and Prepaid Cards

Law/regulation Debit cards Prepaid cardsa

Electronic Fund Transfer Act

15 U.S.C. §§ 1693-1693r

Regulation E

12 C.F.R. Part 1005

• Cardholder liability limited to $50 if 

cardholder notifies issuing financial 

institution within 2 business days after 

discovering the loss or theft of an access 

device. Notification after 2 business days 

may result in loss of up to $500 (or more, 

in certain circumstances).

• Financial institutions must disclose fees 

associated with debit card and must issue 

statement for each monthly cycle in which 

a transaction occurred and at least 

quarterly if no transaction occurred.

• Financial institutions must provide 21-day 

notice before altering fee schedule or 

liability limits for unauthorized 

transactions.

• Cardholders must provide their financial 

institutions with written permission to allow 

institution to charge overdraft fee for onetime debit card or ATM transaction use 

while balance is negative (“opt in”).

• Regulation E generally does not apply, but 

Bureau of Consumer Financial Protection 

(CFPB) has issued an advance notice of 

proposed rulemaking as it considers 

whether to extend the regulation’s 

protections to prepaid cards.

• Cardholder liability not limited under 

federal law, although liability may be 

limited by contract.

• No disclosure or periodic statement 

requirements under federal law.

• No requirement that card issuers provide 

notice of fee changes. Prepaid cards also 

may have more fee types than debit 

cards.

• Generally, cardholder cannot spend more 

than card’s loaded value.

• Credit CARD Act restrictionsb on 

dormancy fees, service fees, or expiration 

dates apply only to gift cards, not to cards 

used more generally as replacements for 

checking or deposit accounts.

Appendix IV: Federal Provisions Addressing 

Debit and Prepaid Cards
Appendix IV: Federal Provisions Addressing 

Debit and Prepaid Cards

Page 50 GAO-14-91 College Debit Cards

Law/regulation Debit cards Prepaid cardsa

Family Educational Rights and 

Privacy Act (FERPA)

20 U.S.C. § 1232g

34 CFR Part 99

• Generally, institutions of postsecondary 

education must have written permission 

from students to release personally 

identifiable information from student’s 

education record. However, FERPA allows 

disclosure of student records without prior 

consent to “school officials”who can be 

outside parties contracted by the schools, 

such as debit card providerswith a 

legitimate educational interest, and to 

appropriate parties in connection with 

financial aid.

• Schools may disclose without consent 

“directory information,” such as a student’s 

name, address, and date of birth.

• Outside parties receiving student 

information must give the information the 

same protection as schools and can use it 

only for intended purpose.

• FERPA does not apply until student 

begins attending the school.

Loading of card with personally identifiable 

information before student consents to the 

relationship is a violation of FERPA.

Federal deposit insurance Underlying checking or deposit accounts to 

which debit cards are tied carry up to $250,000 

in mandatory Federal Deposit Insurance 

Corporation (FDIC) insurance.

• Funds linked to prepaid card may or may 

not be insured. Cardholders may not be 

covered by deposit insurance if FDIC 

requirements for “pass-through” insurance 

not met.c

• Card issuers may choose whether to 

cover the product with FDIC insurance. 

Others may opt for coverage through state 

money transmitter licenses, which require 

a surety bond.

Expedited Funds Availability Act

12 U.S.C. §§ 4001-4010

Regulation CC

12 CFR Part 229

Electronic payments must be made available 

on first business day following banking day of 

deposit (“next-day availability”). Transaction 

accountholders must receive disclosures on 

when funds will be available.

Generally, prepaid cards not subject to 

Regulation CC, but the provision could apply, 

depending on card features.

Regulation II (debit card 

interchange fees and routing)

12 C.F.R. Part 235

• Debit cards are subject to regulatory 

standards for assessing whether 

interchange fees received by debit card 

issuer for electronic debit transaction are 

reasonable and proportional to the costs 

incurred by issuer for the transaction.

• Interchange fee standards do not apply to 

interchange fees charged or received by 

debit card issuer that has total assets of 

less than $10 billion (with affiliates) and 

holds the account being debited.

Certain prepaid cards are exempt from 

interchange fee limitations. If prepaid card is 

only means of accessing underlying funds 

(except when all remaining funds are provided 

to cardholder in single transaction), 

interchange fee standards do not apply.
Appendix IV: Federal Provisions Addressing 

Debit and Prepaid Cards

Page 51 GAO-14-91 College Debit Cards

Law/regulation Debit cards and Prepaid cards

Higher Education Act of 1965, as 

amended, Title IV

20 U.S.C. §§ 1070-1099d and 42 

U.S.C. §§ 2751-2756b

34 C.F.R. § 668.164

• Regulations implementing Title IV permit payment of funds to student or parent bank 

account, defined as an account insured by FDIC or the National Credit Union Share 

Insurance Fund. The account may be one that “underlies a stored-value card or other 

transaction device.”

• When a school opens a bank account on behalf of a student or assists a student in opening 

a bank account, the school must, among other things: obtain written consent from the 

student to open the account; inform the student of the terms of account prior to opening; 

ensure the student does not incur costs in opening account or receiving a debit or ATM 

card; and ensure the student has “convenient access” to ATM or branch of the bank.

• When a school opens a bank account for a student, regulations prohibit the school from 

subsequently converting the account or card to a credit card or credit instrument.

• Credit balances that remain after the school applies Title IV funds to pay tuition, fees, and 

room and board must be paid to the student as soon as possible but (1) no later than 14 

days after balance occurred if the balance occurred after first day of class; or (2) no later 

than 14 days after first day of class of a payment period if balance occurred on or before 

first day of class of payment period.

Federal Trade Commission Act, 

Sec. 5

15 U.S.C. § 45

Consumer Financial Protection Act 

of 2010 (CFPB authority regarding 

unfair, deceptive, or abusive acts or 

practices)

12 U.S.C. § 5531

• Section 5 of Federal Trade Commission Act (FTC Act) prohibits unfair or deceptive acts or 

practices.

• The Federal Trade Commission (FTC) has FTC Act jurisdiction over financial products and 

services offered by entities other than banks, thrifts, federal credit unions, certain nonprofit 

organizations, and those specifically exempt from FTC jurisdiction.

• The Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve 

System, and FDIC have FTC Act jurisdiction for financial institutions they regulate.

• The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created CFPB, 

gives the agency enforcement authority over unfair, deceptive, or abusive acts or practices 

by covered persons or service providers.

d

• An act or practice may be unfair if it causes, or is likely to cause, “substantial injury” to 

consumers; is not reasonably avoidable; and any injury is not outweighed by benefits to 

consumers or competition.

• Using FTC standard for deception, CFPB may find acts or practices deceptive if the 

representation, act, or practice is material and misleads or is likely to mislead a consumer, 

and the consumer’s interpretation is reasonable under the circumstances.

• CFPB may declare an act or practice “abusive” if (i) it “materially interferes” with a 

consumer’s ability to understand terms of a financial product or (ii) if it takes unreasonable 

advantage of the consumer’s (a) lack of understanding of the material risks, costs, or 

conditions of a product, (b) a consumer’s inability to protect his/herself in selecting or using 

the financial product, or (c) consumer’s reasonable reliance on a person to act in the 

interests of the consumer. 

Regulation P (privacy provisions 

of Gramm-Leach-Bliley Act)

12 C.F.R. Part 1016

• Initial disclosure of a privacy policy must be made when customer relationship for purchase 

of financial product or service is established with an institution.

• Financial institutions also must annually explain their data-sharing process and provide 

cardholders with an opportunity to opt out of certain information-sharing arrangements.

• An institution of higher education that complies with FERPA and also is a financial 

institution subject to FTC’s enforcement jurisdiction is deemed to be in compliance with 

Regulation P. 

Source: GAO review of laws and regulations.
Appendix IV: Federal Provisions Addressing 

Debit and Prepaid Cards

Page 52 GAO-14-91 College Debit Cards

a

We use “prepaid card” to mean general-purpose reloadable cards.

b

Credit Card Accountability Responsibility and Disclosure Act of 2009, Pub. L. No. 111-24, § 401, 123 

Stat. 1734, 1751-1754.

c

According to FDIC, funds placed on a prepaid card may or may not be covered by deposit insurance 

in the event of a bank failure, depending on how the account where the funds are held is set up and 

whether the bank or the card issuer’s records at the time of the bank closing identify each 

cardholder’s ownership interest. See 

www.fdic.gov/consumers/consumer/news/cnsum12/paymentcards.html.

d

Pub. L. No. 111-203, § 1031(a), 124 Stat. 1376, 2005 (2010).
Appendix V: Comments from the Department 

of Education

Page 53 GAO-14-91 College Debit Cards

Appendix V: Comments from the Department 

of Education
Appendix V: Comments from the Department 

of Education

Page 54 GAO-14-91 College Debit Cards
Appendix VI: Comments from the Bureau of 

Consumer Financial Protection

Page 55 GAO-14-91 College Debit Cards

Appendix VI: Comments from the Bureau of 

Consumer Financial Protection
Appendix VI: Comments from the Bureau of 

Consumer Financial Protection

Page 56 GAO-14-91 College Debit Cards
Appendix VII: GAO Contacts and 

Staff Acknowledgments

Page 57 GAO-14-91 College Debit Cards

Alicia Puente Cackley, (202) 512-8678 or cackleya@gao.gov

Melissa Emrey-Arras, (617) 788-0534 or emreyarrasm@gao.gov

In addition to the contacts named above, individuals making key 

contributions to this report were Jason Bromberg and Michelle St. Pierre, 

Assistant Directors; Amy Anderson; Rachel Beers; William Colvin; Daniel 

Newman; and Christopher H. Schmitt. In addition, key support was 

provided by Bethany M. Benitez; William Chatlos; John Mingus; Barbara 

Roesmann; and Jena Sinkfield.

Appendix VII: GAO Contacts and Staff 

Acknowledgments

GAO Contacts

Acknowledgments

(250691)
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