Student Loan News: Financial Aid Debit Card Launches; Dept. of Ed. Fined

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Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

FSA Payment Card would be fee-free, optional for students

If you’re a student at one of four universities, you might want to make some room in your wallet.

Purdue University, the University of Georgia, Jackson State University and the University of California at Riverside were selected to participate in the Federal Student Aid (FSA) office’s debit card pilot program, according to Politico.

The so-called FSA Payment Card has been months in the making: Education Secretary Betsy DeVos unveiled the plan in January. It would follow through on the current administration’s goal of helping students pay for secondary expenses like room and board and books without incurring fees for private credit and debit cards.

Here’s how it would work in practice: Instead of being issued a refund for any leftover federal loan funds, the balance would land on the card. Borrowers could then swipe or insert the card to cover other costs of attending college.

All four schools expected to participate told Politico they won’t “endorse or prohibit” the cards but will merely give their students the option of using one. Critics worry about student’s data privacy, as well as whether their financial aid spending would be restricted.

Payment card companies First Data, Urban FT and Metabank were reportedly chosen to work alongside the selected schools.

How it affects YOU: Unless you attend or plan to attend one of the four participating schools, it’s unlikely you’ll be affected right away. If the pilot goes well, however, students and their families could have access to this new payment method at other colleges and universities in the future.

You’ll want to keep critics’ concerns in mind, however. It remains to be seen whether the debit cards would limit your ability to spend your financial aid how you see fit. If you’re a (future) federal student loan borrower, you might take this news as a reminder of how to use extra loan funds and what to avoid.

Also in the news …

  • Education Secretary DeVos was held in contempt of court on Thursday, as a federal judge imposed a $100,000 fine for violating a previous order to stop collecting student loan payments from ex-Corinthian College students. In a Tweet, the Department of Education said it was disappointed with the ruling and acknowledged the mistake of federal loan servicers.
  • In a stunning move elsewhere in the Education Department, the head of the FSA said he planned to resign and, on his way out, endorsed mass student loan forgiveness, according to reports Thursday. Dr. A. Wayne Johnson, a former student loan company CEO, was a surprise appointee when he was hired in 2017.
  • DeVos also drew some news coverage late last week when she used the words “crazy” and “too costly” to describe Democratic presidential candidates’ higher education plans during a TV interview with Fox News. Of the most ambitious debt forgiveness-for-all proposals, DeVos said it would result in “2 out of 3 Americans that aren’t going to college paying for the 1 out of 3 that (does).”
  • Sallie Mae received some criticism earlier this week, after an NBC report said the lender was hosting a Maui retreat for its executives and sales team, even as student loan borrowers struggle across the country. Sallie Mae’s official response included the fact that it owns just 1.4% of America’s outstanding student loans.

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Published in News & Policy, Student Loans

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