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Student Aid Regulations

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This week, the Department of Education has issued new regulations for debit and credit cards that are linked to student aid disbursements. Many consumer advocates have argued the prepaid cards that are associated with student aid have unnecessarily high fees associated with the bank accounts and a lack of transparency. This can essentially chip away at federal funding college students receive. These new regulations are in place to protect students moving forward. According to the Department of Education, the rules will do the following: 

1. Require institutions to give students greater choice about how to receive their student aid.

2. Prohibit institutions from requiring students or parents to open a certain account into which their student aid refunds are deposited.

3. Require institutions to ensure that students are not charged excessive and confusing fees (e.g., overdraft fees and transaction-swipe fees) if a student selects an account offered directly or indirectly by contractors that assist institutions in making direct payments of Federal student aid.

4. Require an institution to provide students with a list of account options that the student may choose from to receive their student aid refunds, where each option is presented in a neutral manner and makes clear that the student can have their funds deposited to their preexisting bank account.

5. Require institutions to ensure that electronic payments made to a student's preexisting account are made as timely as, and no more onerous to the student than, payments made to accounts marketed through the institution.

6. Allow institutions to share limited student information with third-party servicers that offer financial products to allow the continued functioning of disbursement processes, while also protecting private student information, such as Social Security numbers or portions thereof.

Student aid is an important part of young adults' financial future. The lower the fees and the more transparent these companies have to be, the better. 

What do you think about the new regulations?

 

 

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