Transparency urged in college debit card use

Small fees add up for college students using college-issued debit and prepaid cards, which are often used to draw financial aid, and congressional investigators Thursday urged greater oversight of their use.

These types of cards are becoming more common on campuses and double sometimes as student ID cards. They are popular with administrators and many students because of the convenience, but using a third-party financial provider also can save colleges and universities money as they offer services such as distributing financial aid or making tuition refunds.

The Government Accountability Office said the fees generally are similar to those other debit cards charge. But, it said, some students end up with out-of-network ATM fees, and some cards charge a fee if students enter a pin number to receive money instead of signing to get cash back.

The GAO says it's unclear how much money is garnered from these fees, but Federal Deposit Insurance Corp. staff members told GAO it has received student complaints of fees ranging from hundreds of dollars to more than $1,000.

Contract terms between colleges and financial institutions should be more transparent, the GAO report says. Students are supposed to have convenient access to aid money, and GAO asked the Education Department to define what that means in terms of access to ATMs. It also urged the department to develop requirements to ensure students know all their options.

In the report, Education Department officials said they agreed with the recommendations. The department has convened a rule-making session next week to address the issue.

In 2009, Congress passed a law that requires credit card companies to disclose relationships with colleges and universities. That law doesn't include college-issued debit or prepaid cards, according to Consumer Financial Protection Bureau. -- AP