Laws Would Regulate Student Debit Cards

Bills regulating how third-party firms disburse financial aid to Oregon students got stalled during the last legislative session. Reps. Nancy Nathanson (D-Eugene) and Paul Holvey (D-Eugene) are working on several bills to make sure students are getting the best and fairest deals.

Since the late 2000s, most public universities and colleges in Oregon (though not the UO) have had contracts with external firms to distribute financial aid, scholarships and loans to students. The idea was that schools would save money. However, many students now feel that the cost “savings” have actually been a cost “shift” to students who are already in debt.

Mario Parker-Milligan, the Legislative Director of the Oregon Student Association, was a student at Lane Community College when he first discovered what he calls the “predatory” practices of the third-party firms. LCC contracts with Higher One, a Connecticut-based firm that is widely used in Oregon and across the country. Parker-Milligan is now working with legislators to get regulatory laws passed to make sure some of the things he experienced don’t happen to future students.

At the first public hearing on the proposed bills to regulate the financial aid firms, Nathanson gave several examples of how the firms have been preying upon students like Parker-Milligan. One way is how financial aid information is explained. Nathanson says it’s not clear to students that they don’t have to use a debit card the firm provides. The debit card is presented as the default option for students to get their financial aid money that didn’t go to tuition.

Often, the debit card sign-up form is mixed in with many other forms they sign on registration day. Instead of learning that they have the option to get a direct deposit or check for their financial aid package, they sign up for a debit card with scores of fees and rules.

Higher One has a 50-cent “swipe fee” for every time the card is used. Some cards have withdrawal limits that are lower than an average monthly rent payment. Nathanson says students have been charged reloading fees, transfer fees, even a $19 inactivity fee — leaving students already strapped for cash burdened even further.

One of Nathanson’s bills, HB 2832, would require that contracts for these debit cards be published on the university or college’s websites. Nathanson says they never even “see the light of day.” Another idea being floated in the Legislature would give the Higher Education Coordinating Commission (HECC) authority to approve contracts. They would have to meet certain requirements — like providing a clear and concise fee schedule, and having no swipe fees.

Nathanson’s other bill on the issue would give full authority to the State Treasurer or the HECC to negotiate contracts. That has been met with some resistance from schools who want to be able to negotiate on their own.

Several students testified at the public hearing on these three bills. Students from LCC recounted horror stories of lines at the only two ATMs on campus that distribute financial aid without charging an extra fee.

Ashley Jackson, a student at LCC, alleged that students are “lobbied” by enrollment officers to use Higher One. She voiced concern that the various fees students pay to Higher One go out of state. Eric Noll, an intern with the Oregon Student Association, described how the cards look like something the school provides, sometimes even doubling as an ID card. Cheryl Hiemstra, assistant attorney general of the Oregon Department of Justice, testified that students don’t have the opportunity to make a free market decision, because not enough information is given.

Parker-Milligan is fairly confident legislation will actually go through this session. He says the main focuses are to make the contracts available to the public, and to make sure the choices for opting out of the debit cards are explained clearly.

In 2014, Parker-Milligan says Higher One hired a lobbyist who argued the federal government was going to act to regulate financial aid disbursement firms, so state regulations wouldn’t be necessary. He thinks they might do something similar but adds that legislators see there is still urgent reason to act locally.

“We are really concerned that there are millions of dollars of public funds that don’t have oversight,” Parker-Milligan says.

HB 2832 has a work session scheduled Friday, April 17. Nathanson and Holvey have been working to amend the bill to include provisions and ideas from the other proposed laws. If not passed out of committee by Tuesday, April 21, the bill will have no future in this session.

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