By Kurtis Ming

College students used to get financial aid through checks. But more than 500 campuses across the country are allowing to students to get their student aid through debit cards.

While it saves schools money, by not having to print checks, some say students are paying for it.

Driving from Tracy to Stockton, that’s how far Bobby Pryor has to travel just to find an ATM that’ll give him his financial aid without a fee.

“At least 35 to 40 minutes out of my way, one direction just to get to an ATM,” said Bobby.

The San Joaquin Delta College student is like millions across the country, now receiving financial aid through Higher One debit cards.

You can access the money from any ATM but unless it’s a Higher One machine, you’ll pay fees.

  • $2.50 if you use a non-Higher One ATM, plus another $2 to $3 fee from the other bank
  • 50 cents if you swipe it as a debit card, using your pin. That’s on top on whatever the merchant charges
  • $10 a month if your account remains inactive for 6 months or longer

“It feels predatory, it really does,” said Dannielle Bush, San Joaquin Delta College student.

The U.S. Public Interest Research Group says students may not realize they have a choice to still get the old fashioned financial aid check or direct deposit.

“Higher one uses scare tactics. They tell students that if they want their money as soon as it’s available, the only option where they can do that is getting the money in a Higher One debit card,” said Rich Williams, Higher Education Advocate, U.S. Public Interest Research Group.

A Southern California student filed a class action suit against Higher One, alleging “unfair and unconscionable practices…”

And after the FDIC reached an $11 million settlement with the company for “alleged unfair and deceptive practices…” the company launched a new type of account where you’ll pay a flat fee of $4.95 each month to avoid the other fees.

Although US PIRG says that adds up to $59.40 a year, more than the average $49 Higher One says most students pay.

“That is money meant for education, it is not meant to be siphoned off by banks,” said Williams.

The billion dollar company was created by two Yale grads in 2000, profiled here in a story earlier this year.

“We were constantly talking about ways to solve problems in the world,” said Miles Lasater, COO, Higher One.

The company responded to our questions in an email, saying their program allows students to “receive their funds faster…”

“There are absolutely no hidden fees….”

“Colleges and universities are saving millions by choosing to go electronic…”

And our “account is cheaper than the top 4 national banks, top 12 regional banks and 8 prepaid cards we survey every quarter.”

Shoba Lemoine,
Media Relations

Bobby has chosen to cancel his Higher One account, going back to the old fashioned way of getting student aid.

“It’s really ridiculous that they’re getting away with this type of deal… It’s really highway robbery.. that’s a lot of money for students,” said Bobby.

So what about the schools who are signing for the program?
The American Association of Community Colleges had no comment.

San Joaquin Delta College told us it signed up because it helps students get financial aid quicker and cuts down on check fraud.

Higher One says it will offer a fee waiver for students at the Tracy campus who don’t have immediate access to a Higher One ATM.

How much are schools saving?

San Joaquin Delta College told us they’re only saving the cost of postage to mail out financial aid which they say is about $7,500 a year.

Higher One says colleges save up to $20 per student.

Higher One Statement
These accusations are false and you need to consider your sources. I will provide you with all the correct information, since US PIRG is spreading misinformation about our business and has been for months. US PIRG itself is funded by student fees-and in the past has had trouble in many states where it imposed “mandatory” student fees that increased the cost of tuition. US PIRG has an open agenda against Higher One and it savors the media spotlight. We are the latest trend it is latching onto so that it can receive media attention for its organization. This story has been done and done and done again. And in California and on TV, no less, there has already been tons of coverage. You can cover the mistruths that we have “hidden fees” but that story is already been done and disproven. I’m attaching dozens of quotes from colleges all over the country. This story is simply not true

Almost all banks cap withdrawals at $500 a day, if not less. Also they dispense cash mostly in $20s. Our students gave us feedback that they wanted $10s, so we chose to use $10s and $50s. That is simply not a complaint we get very often because we got more complaints when students had $19 in their account and couldn’t take it out.

The student has 100% choice on how they receive their refunds. They can get a paper check, have it deposited electronically into the bank of their choosing-any one in the US, OR they can PROACTIVELY go through the steps to open up a checking account with Higher One. ALL 3 OPTIONS are always free for the student and they will never be charged to receive their money, per the dept of Ed.

Students voluntarily choose to open up a checking account with Higher One. For the basic account, there is no minimum balance requirement, no credit check and no monthly fee. Many students use it for free. There are absolutely no hidden fees. Higher One, because it works only with students and was founded by students in 2000, has always been transparent with its fee schedule. How fast can you find your bank’s fee schedule? We challenge you! You will find ours faster if you work with us. In fact, we went one step farther and created a pop up screen that takes up the entire screen that explains every conceivable fee that an accountholder could ever incur. The student actually has to read it and accept BEFORE they are able to open the account.

Does this sound like fine print or hidden fees? If a student doesn’t like the account, just like any other checking or bank account in the US, they can close the account (which they went through many steps to open) and receive their financial aid refunds for free two other ways-by check or into a different account. Its that simple. Those that complain about the structure of the account were well informed about the structure of the account when they signed up for it. In addition, the account is cheaper than the top 4 national banks, top 12 regional banks and 8 prepaid cards we survey EVERY QUARTER. We wouldn’t feel right about offering a product that isn’t a good value for students.

This is a quick response, but you see there are simple mistruths.

Response to CBS13 Questions:

Why does Higher One charge fees in the first place? Why not just make your OneAccount free for students to use?

Students are never charged to receive their financial aid money when working with Higher One! Receiving their refund is ALWAYS cost-free and they will ALWAYS have choices for receiving their money faster through electronic choices over the previous paper check process (including having their refund deposited into their own accounts for free). So where is the issue? This process is mandated and regulated by the Department of Education and we’ve been helping colleges with the process for more than a decade. We provide financial and banking services to colleges and have many services. Less than 50% of our total revenues comes from fees assessed to accountholders of checking accounts we offer.

In 2000, Higher One was founded in a college dorm room by students who wanted to help make life easier for students. Today, Higher One makes life easier for millions of students on hundreds of college campuses by delivering their financial aid refunds more conveniently, electronically, and with access to optional banking services.

For students, working with Higher One means:

  • Getting a financial aid refund will always be cost-free
  • Students will never be charged to receive 100% of their refund money, per requirements set by the Department of Education.
  • Having online and electronic options-beyond a paper refund check
  • Higher One provides an easy online setup for choosing an electronic transfer of funds directly to the student’s domestic bank account or students can choose to open up a Higher One checking account.
  • Having options to receive their refunds faster
  • Traditionally, once their college released the funds, students didn’t have a choice but to wait for a paper check.
  • Once the college releases the funds, Higher One allows students to: receive their refund electronically in as little as 2 days into the bank of their choice, open up a Higher One account and receive their funds the same day, or opt to wait 5-7 days for a traditional paper check.
  • Their college or university entered into a fair agreement with Higher One
  • Higher One has never paid schools to enter into contracts or to provide its services on campus.
  • Higher One calls for an end to the practice of big banks paying millions for the rights to sell on campus. Higher One has never operated this way.
  • Schools contract with Higher One for its refund disbursement service mostly by paying Higher One via a subscription model.
  • More security and oversight
  • Higher One never sells or shares personal information with any third party providers or services.
  • Higher One assists compliance with the Dept. of Education’s specific regulations on debit cards and the electronic distribution of financial aid refunds.
  • Higher One is also required under federal law to submit to examination by federal regulating bodies of its bank partners.
  • Higher One’s electronic financial aid distribution methods help reduce financial aid fraud.
  • Having access to online banking services with absolutely No Hidden Fees
  • Higher One has always been more transparent than most other checking accounts.
  • Students opening up an account with Higher One will always be shown what fees could be charged in any type of circumstance before opening an account.
  • Higher One goes the extra mile with explanations of fees and fee-avoidance instructions and videos.
  • Having access to online banking services that are straightforward and low-cost
  • Higher One’s checking accounts require no credit checks, so students won’t be turned down.
  • Higher One compares the cost of maintaining its accounts with the biggest national and regional banks on a quarterly basis to ensure its annual cost is on the low end.
  • Higher One’s primary OneAccount has no monthly fee and no minimum balance requirement.
  • Higher One has now eliminated PIN-based fees from two of the three OneAccount options available to students.
  • Higher One has 700 ATMs located on college campuses around the country and also adheres to an ATM Commitment Policy.
  • Accountholders can also swipe and sign for their purchases at no cost anywhere MasterCard is accepted.
  • The school is saving money and reducing paper waste
  • Colleges and universities are saving millions by choosing to go electronic with processing financial aid refunds, which used to require printing, envelopes, and postage costs.
  • One example: Houston Community College cites a $4 million dollar savings over the course of four years, using two of Higher One’s electronic financial services.
  • Tuition is rising. By moving to a more environmentally conscious and cost-saving process, schools are able to focus on other services that affect students.

Response to CBS13 Questions:

You say students will never be charged to receive their student aid money, so why are students being charged 50 cents for each PIN based debit swipe, $2.50 for using a non-Higher One ATM and $10 for account inactivity after 6 months? Why not eliminate these fees on all your Higher One Accounts? Also, can you confirm that Higher One made $88 million dollars in convenience fees in 2011 alone?

I know you must now understand that students working with Higher One are able to choose how they want their money and they will receive it cost-free. I also know you must understand that they are choosing to open up accounts with Higher One after reading the very clear disclosures we provide.

Did you see how our checking account stacks up against other checking accounts from national and regional banks? I sent you a link to an actual study conducted. National and regional banks cost hundreds of dollars a year for student checking accounts! Do you have a banking account? You should really check out the fee schedule for your account. Our schedule of fees is lower cost than the national and regional banks.

Have you been following the news? Bank fees are on the rise. Read Forbes, CNN, Time, any outlet. We are constantly keeping our accounts low cost for students. Just because you see a charge on a fee schedule doesn’t mean the accountholder incurs that fee. And if you have it, I’m happy to review the information you have that shows any banks that offer checking accounts for students are absolutely free.

I do not know the source of your $88 million dollar number so cannot confirm. I have stated that less than 50% of our revenue is derived from fees assessed to accountholders. We are a public company and this is how we disclose it. You are free to sift through any of our SEC filings-they are all open and transparent.

I think I’ve made my point. If you’re going to tell a fair story I’ve given you all the information you need to do it. The rest is up to you and your station.

Also, all the fees you state and that are on our fee schedule are completely avoidable. The out of network ATM fee, for example—don’t you use an ATM in your network to avoid a fee?

I think your questions are fundamentally aimed at how banking in the US is structured…I would interview some banks and do some research there if bank fees are your concern.

We abide by a specific mandate set by the dept of education on having ATM access so we are always in compliance with this regulation.

Also, other accounts we offer waive a certain amount of these ATM fees. Students can pick those. And we just announced the Edge account this year that will have no ATM fees from Higher One ever! The press release is on our site. Its great news…we hear what students are asking for and we offer many options is what I’m trying to explain.

Here is the link to the Edge: no fees but 4.95 a month–ever!

This study shows that our account (average annual cost at $49) is significantly less than usage of national and regional and prepaid cards.

Shoba V. Lemoine,
Media Relations | Higher One

San Joaquin Delta College Statement

Thanks for your call last week and for the opportunity to discuss my experience with you regarding Higher One.

As we discussed, I have had very few student complaints since we converted to Higher One. As a matter of fact, from what I can tell (after a quick review this week) we had a near perfect renewal rate for those students who chose the One Account. Additionally, our financial aid students still maintain a choice. They can choose to stay with their own bank or they can switch to Higher One (One Account). Either way, they are receiving their financial aid funds much sooner than before (anywhere from 4-7 days sooner depending on which option they choose). Additionally, our disbursements are greater in number than they have ever been before and the lines in our lobby, to speak with a financial aid specialist, have gone down significantly.

To answer a few of your questions on our call:

1. Did Delta profit from this decision?

a. No. As I shared, I estimated that we are saving $7,500 in postage and in-kind costs for the time spent printing checks, stuffing envelopes, etc.

b. My request was/is student-focused as I am myself a prior financial aid student. This request was based solely on efficiency and safety. In Stockton, we had been experiencing a large increase in fraud. When checks were still being mailed out, we started to experience a huge increase in financial aid fraud (checks missing from mailboxes, fraud at check cashing stores, etc.). In 2011, I turned in a list to the Office of Inspector General with over 16 financial aid fraud cases.

Also – we just received a call this morning from the District Attorney special agent that we have been working with in terms of the fraud rings. I am attaching this story as well:

2. Do colleges profit when processing financial aid?

a. No, not at all. We serve as a clearing house. Many financial aid funds are entitlements (Pell Grant, Direct Loans, etc.) We receive the funds from the Federal and/or State government and we pass these funds along to the students. The government does hold out a processing fee on Direct Loans, not the colleges or universities.

3. Am I familiar with a lot of fees being charged to our students from Higher One?

a. No, I am not. As a matter of fact, Higher One offers financial literacy information both on-line and in person. As part of our campaign we made it clear to our students that they needed to ‘just swipe and sign’. It is a debit card but if the student simply swipes the card and chooses the credit option and signs, there are no fees charged and the student is covered under the MasterCard Zero Liability Policy. Higher One’s fee schedule is available from any page on the account website and the student must acknowledge that they have read the fee schedule when opening the checking account. There are some fees associated with any bank’s checking account such as wire transfers, stop payments, etc., as is the case with the OneAccount.

In case you haven’t had an opportunity to review the Higher One website from the student/user end – I am inserting the link here:

4. Am I familiar with the fact that there is not an ATM at the Mtn. House campus?

a. Yes I am and this is something that Delta has been working closely on with our facilities department as well as Higher One. What is important to note is that until this is resolved, Higher One has offered a Fee Waiver of up to $5/day to any of our Mtn. House financial aid students at our Mtn. House campus. Copies of this waiver have remained available at the Mtn. House campus. They have honored this agreement since we went live in January of this year and they continue to as of today.

I hope that I have answered your questions, as I remembered them. When a decision like this is made, I realize that all students will not be pleased but I am available to assist any of our students with this transition to the best of my ability.

Best regards,

Denise Donn,
Director of Financial Aid & Veteran Services,
San Joaquin Delta College