College-sponsored bank accounts ding students with millions of dollars in fees each year, according to a report by the Consumer Financial Protection Bureau.
The Education Department under President Donald Trump never published the analysis but advocacy groups recently obtained it through a Freedom of Information Act request. The bureau reviewed 573 colleges across the country with marketing agreements with banks.
It found that 1.3 million students attending these colleges had open and active accounts with their colleges’ account providers.
Students using accounts at these schools paid more than $27 million in fees during the 2016-2017 academic year, including overdraft and penalty charges.
Wells Fargo charged students $46.99 a year in fees on average. College students who used accounts with PNC typically paid $15.84 a year. (Most Americans pay around $9 a month, or $108 a year, for their checking accounts, according to consumer finance site Bankrate).
“A lot of college students are on really, really tight budgets,” said Whitney Barkley-Denney, a specialist in student finance at the Center for Responsible Lending. “Any kind of disruption in that cash flow can be devastating.”
Wells Fargo announced this month a number of new benefits for its campus card customers, said Jim Seitz, a spokesman for the bank. Students won’t pay any fees on their first four withdrawals at non-Wells Fargo ATMs in the month and can have one overdraft charge a month refunded.
PNC does not charge a monthly fee on student accounts and it waives the first overdraft fee in the account’s first year, said Amy Vargo, vice president of media at the bank.
To be sure, at most colleges, a majority of students paid no fees when using sponsored accounts, the CFPB found.
Banks can compensate colleges based on the number of students who open and use their accounts, a practice that has raised concerns for consumer advocates.
“When you promote marketing of one financial product over another, it tends to remove the students’ incentive to comparison shop,” said Colleen Campbell, associate director of postsecondary education at the Center for American Progress.
Nearly 120 colleges report being rewarded by a bank to promote its financial products, according to the bureau. Wells Fargo paid $2,127,554 to colleges in the 2016-2017 academic year. PNC paid $7,562,570.
In its agreement with Wells Fargo, Texas State University could receive up to $300,000 if every enrolled student were to open an account.
Students at schools with a paid marketing agreement with a bank were assessed, on average, more than double the annual fees (or $34.34) as those students at a school without one ($15.11), according to an analysis by the U.S. PIRG Education Fund and Frontier Group.
“An argument can be made that these institutions aren’t acting in the best interest of their students,” Campbell said.
“College is already one of the biggest expenses many Americans will face,” conclude the authors of the report by U.S. PIRG Education Fund and Frontier Group. “Students should not have to worry about being taken advantage of by banks with which their school has developed a partnership.”
Education Department press secretary Liz Hill said the bureau’s research confirmed the importance of the department’s upcoming pilot program, in which certain students receive their financial aid on a debit card, including a fee-free option.
A spokesperson for the Consumer Financial Protection Bureau said the CFPB doesn’t comment on unpublished studies.
