Annual student banking report highlights the steep costs and unfavorable terms of college-sponsored credit cards, deposit accounts, and other financial products
The Consumer Financial Protection Bureau (CFPB) issued a reporttoday highlighting that many college-sponsored financial products have higher fees and worse terms and conditions compared to typical market products. The CFPB report identifies college-sponsored deposit accounts with fees above prevailing market rates, which institutions are required to consider under Department of Education rules designed to protect students’ interests.
“Many students get their first credit card or deposit account when they enroll in college, and banks know that consumers are unlikely to move to a different provider once a product is integrated into their financial life,” said CFPB Director Rohit Chopra. “Schools should take a hard look at the fees and terms of the products they pitch to their students and alumni.”
Many colleges offer sponsored and co-branded financial products to students and alumni, such as deposit accounts, credit cards, and prepaid cards. Students may be likely to accept their school’s recommendation of a bank account or credit card when they arrive on campus, meaning that colleges and their financial institution partners may not face competitive pressure to lower fees or provide low-cost products. These arrangements can be lucrative for schools, as financial institutions pay tens of millions of dollars every year to colleges and universities, including flat-fee marketing deals and per-signup kickbacks.
In 2022, the CFPB’s College Banking and Credit Card Agreements report described the high fees charged on student banking products endorsed by colleges. The report made clear that financial institutions and colleges may be steering students into expensive financial products. Today’s report found that many colleges continue to employ marketing strategies that may mislead students into accepting products that may not be the best choice for them. Among the student risks identified in today’s report:
- Colleges’ financial product partners may charge students high or atypical fees: Although most of the largest banks have moved away from charging overdraft and non-sufficient funds (NSF) fees in recent years, some of the sponsored deposit accounts in the report do charge students those fees. Thus, students who follow their school’s advice may be steered into accounts that cost them much more than what they would pay in the open market.
- Fees paid by students often vary by institution type: The average fee burden varies by the type of institution. The report finds that accountholders at Historically Black Colleges and Universities (HBCUs), for-profit colleges, and Hispanic-servicing institutions (HSIs) all pay higher-than-average fees per account.
- Students face unexpected fees at graduation: Some financial institutions impose additional fees when a student graduates or reaches a certain age, relying on “sunset” clauses in the products’ terms and conditions. Students who sign up for a product marketed as free may thus end up being charged monthly maintenance fees, or overdraft and NSF fees they did not anticipate.
The report notes that the CFPB will continue to examine these practices and identify possible violations of federal consumer financial protection law.
Today’s report is the 14th annual report to Congress in fulfillment of the CFPB’s requirements, pursuant to the CARD Act. For the report, the CFPB performed a review of publicly available information on college websites to gather data on the financial products that colleges offer directly to their students or jointly market to their students with third-party providers.
Read College Banking and Credit Card Agreements, Annual Report to Congress.
Read the CFPB’s September 2023 report, Tuition Payment Plans in Higher Education.
Learn more about the CFPB’s student loan resources.
Learn more about the CFPB’s student loan research.
Consumers can submit complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
Employees who believe their companies have violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website.