Earlier this week, the U.S. Department of Education (DOE) published a Notice of Proposed Rulemaking in the Federal Register to amend the cash management regulations of the Student Assistance General Provisions regulations issued under the Higher Education Act of 1965, as amended (HEA).
The department was prompted to issue the proposed rule after receiving a number of reports from government and consumer groups documenting a troubling pattern of practices being employed by some financial account providers, including:
- Providers prioritizing disbursements to their own affiliated accounts over aid recipients’ preexisting bank accounts.
- Providers and schools strongly implying to students that signing up for the college card account was required to receive Federal student aid.
- Private student information unrelated to the financial aid process being given to providers before aid recipients consented to opening accounts.
- Access to the funds on the college card was not always convenient.
- Aid recipients being charged onerous, confusing, or unavoidable fees in order to access their student aid funds or to otherwise use the account.
The burden of the new regulations on post-secondary institutions largely depends on their current relationships with banks and debit card providers. For example, many large, public flagship institutions have revenue arrangements with banks and debit card providers. If an institution has such an arrangement, they will need to revise their contracts to comply with these regulations when they are made final.